After a long 16 months of negotiations, the largest U.S. mobile
Verizon Communications Inc.
) recently reached a new three-year tentative agreement with two
labor unions, including 45,000 employees. The old contract expired
on August 6, 2011. The two labor unions are Communications Workers
of America and International Brotherhood of Electrical Workers.
This new deal seems to have resolved the dispute that led to the
14-day strike in August last year after the company failed to
negotiate the new labor contract. The employees involved in the
strike were from the company's Wireline division in the
Mid-Atlantic and Northeast regions, which is losing money to
Though Verizon's efforts to freeze employee pensions and change
some job security pensions failed, the new contract requires the
employees to contribute for healthcare benefits. The new contract
also appeals for an 8% increase in wages over four years. The wage
hike will be effective from August 2011 and will continue through
August 2015. The deal will take about a month for final approval.
Many of the workers covered under the new contract are technicians
that install and maintain the company's FiOS fiber-optic network,
which represents an integral part of the carrier's long-term growth
During the recently concluded second quarter, the company added
120,000 and 134,000 new customers to its FiOS Video and FiOS
Internet services, respectively. The penetration rate (subscribers
as a percentage of potential subscribers) of both FiOS Internet and
FiOS Video increased to approximately 36.6% and 32.6%,
respectively, across all markets from the year-ago respective
levels of 33.9% and 29.9%.
Verizon is poised for healthy wireline growth through product
streamlining and process simplification initiatives as well as cost
management actions. However, the company faces stiff competition in
deploying FiOS fiber-optic network from cable operators such as
Time Warner Cable Inc.
Cablevision Systems Corporation
We are maintaining our long-term Neutral recommendation on Verizon.
The stock retains the Zacks #3 (Hold) Rank for the short term (1-3
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