Wireless leader
Verizon Communications Inc.
(
VZ
) is offering voluntary buyout to 1,700 workers. They will
primarily include technicians and call-center employees from the
wireline segment.
Verizon plans to cut employees only in the wireline segment. The
company is making efforts to reduce cost in the wireline as the
division is struggling with persistent losses in access lines that
are weighing on its revenues and margins.
The move comes after several months of talks over new contracts
with labor unions, which went on strike last August. About 45,000
employees, represented by Communications Workers of America and
International Brotherhood of Electrical Workers, went on strike
after Verizon pushed them for cuts in health benefits and pension
freezes. Additionally, Verizon has surplus employees in certain
parts of the wireline business.
Out of Verizon's 192,000 total workers, 102,000 do not belong to
any union and are employed in its wireless division, a joint
venture with
Vodafone Group Plc
(
VOD
). The division will not be affected by the buyout offers.
Verizon remains the leading provider of wireless voice and data
communication services in the U.S. as it continues to expand its 3G
and 4G Long-Term Evolution mobile broadband networks. Further,
Verizon's wireless growth prospects remain strong, driven by
customer growth, higher smartphone adoption and the sale of
Apple Inc.
's (
AAPL
) iPhone that will lead to improved revenue.
The voluntary buyout offer applies to less than 1% of the total
Verizon workforce and about 2% of the wireline workers. Verizon
expects the affected employees to leave in early July. The company
will lay off employees if only a few accept the voluntary
package.
We remain on the sidelines for now and will carefully watch the
financial impact of the buyout plan in both the short and long
term. As a result, we are maintaining our long-term Neutral
recommendation on Verizon. Currently, the stock retains the Zacks
#3 (Hold) Rank for the short term (1-3 months).
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