By Jeff Meisner E-Commerce Times
12/04/08 12:08 PM PT
AT&T's coveted status as the only carrier to offer Apple's iPhone hasn't been enough to shield the company from the tide of events. Consumers are abandoning landlines in favor of using cell phones as their primary communication devices -- a trend that is likely to accelerate in a weakened economy.
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AT&T (NYSE: T), the largest phone company in the U.S., announced Thursday that it will cut about 12,000 jobs, or roughly 4 percent of its total workforce, starting this month and through next year.
AT&T also announced it would slash capital spending, but it won't have specific figures ready until it releases its fourth-quarter financial results late next month.
The Dallas-based phone company said it would take a US$600 million restructuring charge in the fourth quarter to pay for severance packages for the employees expected to lose their jobs.
AT&T cited "economic pressures, a changing business mix and a more streamlined organizational structure" as reasons for the cuts.
Its stock was down 1.34 percent at $28.72 per share in mid-day trading on the New York Stock Exchange.
The job cuts come at a time when many other telecommunications and technology companies -- including stalwarts such as HP (NYSE: HPQ), Intel (Nasdaq: INTC), Sun Microsystems (Nasdaq: JAVA) and Yahoo (Nasdaq: YHOO) -- are also slashing their workforces.
Consumers Cutting the Cord
AT&T's landline business is declining, as a growing number of consumers switch to using mobile phones as their primary communications devices.
"The poor economy will hurt the wireline business more than the cell phone business, because consumers will want their cell phones to make calls from wherever they are," Tole Hart, a wireless analyst at Gartner (NYSE: IT), told the E-Commerce Times. "They're certainly not going to drop their cell phones in favor of a landline to save money."
AT&T's financial statements show a clear decline in wireline revenue. The company reported wireline voice revenue of $9.5 billion in the third quarter ended Sept. 30, down 8.1 percent from the $10.3 billion AT&T reported during the same period a year ago.
Realignment of Business
Although AT& T is cutting a large number of jobs, the company said it will add jobs in businesses poised for growth -- wireless, video and broadband.
Its wireless business continues to grow, in part due to an agreement that makes it the sole American vendor of Apple's (Nasdaq: AAPL) popular iPhone.
AT&T reported $12.6 billion in revenue from wireless services and equipment sales in the third quarter, up 15.4 percent compared with the same period in 2007. In total, the wireless unit generated $2.3 billion in profits in the third quarter, up 20 percent over the same period in 2007.
The iPhone is also clearly driving new customers to AT&T. The company said it sold 2.4 million iPhones during the third quarter, with nearly 40 percent of them purchased by new subscribers.
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