Verizon Workers Ending Strike Helps Carrier Mitigate Losses

Verizon Communications Inc. (VZ) said 45,000 striking workers will begin returning to the job tonight while talks continue, a truce that may help the carrier avoid losses a prolonged walkout would have caused.

Employees are returning while the two sides keep negotiating what the company called “major issues.” Benefits, work flexibility and job security are among the matters that still need to be negotiated, Verizon said Aug. 20. Contracts that expired on Aug. 6 will remain in effect for an undefined period, Verizon said.

The workers are probably ending the strike after getting signals that Verizon is more willing to deal, said Jeffrey Keefe, professor of labor and employment relations at Rutgers University in New Brunswick, New Jersey. The work stoppage showed the company that the union was willing to fight even during a period of high unemployment, he said.

“This is not bad for the union,” Keefe said in a phone interview today. “This allows members to work under existing conditions. They still have their pension, traditional health benefits and no wage cuts.”

The step means Verizon will have the employees of its traditional fixed-line unit in the northeast U.S. back at work without giving in to their demands. It may also help the second- largest U.S. phone company improve service times and retain or win more customers after some defected during the strike to rivals such as Time Warner Cable Inc. (TWC)

’No Deadline’

“This is going to take time, that’s why there was no set deadline,” Peter Thonis, a spokesman for New York-based Verizon, said in a phone interview. “We will be meeting again very soon. There is a set schedule for this.”

Alex Dudley, a spokesman for New York-based Time Warner Cable, said the company added field technicians last week to install cable service within 48 hours and ran advertisements promoting fast response times.

“Verizon is losing customers like me because its landline business as a whole is deteriorating,” said Art Rosenzweig, a resident of Jay, New York, who said he switched to Time Warner Cable as Verizon’s service times in rural Essex County declined.

The company’s shares rose 11 cents to $34.82 at 4 p.m. in New York Stock Exchange composite trading. The stock is little changed since the work stoppage began.

Landline Decline

Verizon, which has about 196,000 employees, hasn’t provided an estimate for the cost of the two-week strike. An 18-day standoff in 2000 cost the company $40 million in revenue. This year’s stoppage probably cost less because it involves fewer workers over a shorter time period, said Michael Nelson, an analyst at Mizuho Securities USA Inc. in New York.

Facing a decline in the landline unit, Verizon has been seeking work-rule changes and employee contributions to health- insurance premiums. Workers have said they shouldn’t have to make substantial concessions as earnings rise and executive pay remains healthy.

Jim Spellane, a spokesman for the International Brotherhood of Electrical Workers, said in an interview that the agreement “lowers the temperature and helps create an atmosphere for serious bargaining.”

Candice Johnson, a spokeswoman for the Communications Workers of America, said the talks will resume this week.

Verizon said the two sides have made progress on some local and regional issues, without elaborating. The talks began in July.

Longest Since 2007

The resolution will end a walkout begun Aug. 7 by employees from Verizon’s landline business in nine Northeastern states and the District of Columbia. The labor action was the largest since 73,000 General Motors Co. workers went on strike for two days in 2007, Keefe said.

In an Aug. 7 statement, Verizon Chief Executive Officer Lowell McAdam said the company needed concessions from unions because of the division’s customer losses and eroding profitability. He also cited competition from cable-TV providers that don’t have similar “contract constraints, enabling them to be more nimble and flexible meeting customer needs.”

Verizon’s competitors also include AT&T Inc. (T), the biggest U.S. phone carrier and second-largest wireless operator. AT&T has proposed acquiring Deutsche Telekom AG’s T-Mobile USA, allowing it to surpass Verizon Wireless as the No. 1 U.S. mobile carrier.

Verizon’s revenue and profit fell last year as declines in the landline business offset growth in wireless. The number of fixed lines, including residential and business customers, slid 8.2 percent to 26 million at the end of last year, extending declines since 2003. During the same period, wireless subscribers more than doubled to 94.1 million.

The company’s wireless business has been largely unaffected by the strike.

To contact the reporters on this story: Devin Banerjee in New York at dbanerjee2@bloomberg.net; Crayton Harrison in Mexico City at tharrison5@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net