Unions' decline shows as Wall Street shrugs over telecom talks
More than 60,000 wireline employees of AT&T Inc. and Verizon Communications Inc. are now working without contracts as talks between management and the unions remain deadlocked.
Yet investors and analysts are paying less attention to the labor disputes than they once did, a testament to the shrinking importance of the landline businesses -where most of unionized employees work.
In years past, strikes made Wall Street jittery. In 2000, as more than 80,000 Verizon walked out for more than two weeks, the shares fell 11 percent while the Standard & Poor's 500 Index gained 3 percent. Since then, Verizon and AT&T shares have seen less of a selloff during labor strife, as the telecom giants have focused on wireless, where employees are typically not in unions. In 2011, when 45,000 of Verizon's landline workers walked off the job for 15 days, the stock rose.
"It's not like years and decades ago when the unions can make demands and hold Verizon's feet to fire," said Todd Lowenstein, a money manager with HighMark Capital Management. "The world has changed."
Today's Verizon gets 29 percent of its revenue from landlines, while the company directs growth capital toward wireless and Internet-delivered content. In 2000, wireline accounted for 67 percent of revenue. AT&T, meanwhile, sees 43 percent of its revenue from wireline versus 77 percent in 2000. And AT&T just completed its $48.5 billion takeover of DirecTV, making it the No. 1 pay-TV provider in the U.S.
While Verizon and AT&T employees have worked without a contract before -for more than a year for Verizon workers in 2011-2012 -- the threat of a strike isn't a drag on the stocks like it once was, Lowenstein said. Verizon has climbed 1.7 percent since its contracts with the Communications Workers of America expired Aug. 1. AT&T is up 1.3 percent since Aug. 8, when its contract with the union expired.
"The problem with the traditional landline business is the high fixed costs, including labor costs," Lowenstein said. One reason HighMark likes Verizon is because it has diversified away from landlines, he said. The firm has $16 billion of assets under management, including Verizon shares.