Verizon Is Seeing a Big Dip in New Customers Due to Strike
The massive walk out of telephone, cable TV, and broadband Internet service installers at Verizon Communications has led to a significant decline in new customers this quarter, the company said on Thursday.
Installations and new orders of FiOS service have “significantly dropped” CFO Fran Shammo said speaking at the MoffettNathanson investor conference in New York. As a result, Verizon (VZ) might see a net loss of cable TV or broadband customers in the quarter after showing net gains in both businesses a year ago, Shammo said.
About 40,000 employees who work from Massachusetts to Virginia installing and servicing traditional telephone and the newer FiOS offerings went on strike April 13. For the first month, the two sides traded increasingly heated allegations leading up to an armed confrontation in the Philippines of Verizon security guards and striking U.S. workers. But last Sunday, the Obama administration entered the fray and pressured both sides to return to the bargaining table with a federal mediator.
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Both Verizon and the two unions involved, the Communications Workers of America and the International Brotherhood of Electrical Workers, have agreed not to comment on the new round of negotiations, which kicked off Tuesday in Washington, D.C.
Shammo repeated that pledge on Thursday, though he did add that the start of new talks was “a good sign” that some progress was being made.
Verizon said in April that it did not expect the strike would have a material impact on its financial results for the second quarter. But with the decline in new installations and the need for management and replacement workers to take up repair duties for more than five weeks now, Shammo said on Thursday that there could be an impact.
The expense of new installations is categorized as a capital cost, so capital expenditures could be somewhat lower than expected, he said. But repair costs go into regular expenses, so Verizon’s operating expenses could be higher, he explained.
Shares of Verizon, which have declined 3% since the strike began, were down 2% to $49.35 in morning trading on Thursday.
Verizon says it offered a 7.5% wage hike for the new contract over the next few years. But the telco says it also needs greater flexibility to use non-union employees to lower costs as its telephone business shrinks and its wireless business becomes ever more important.
The unions, however, say they cannot accept Verizon proposals to allow additional outsourcing of call center workers to the Philippines and Mexico, greater use of non-union contract installers, and the assignment of union employees to other cities for up to two months at a time.