Unions' de­cline shows as Wall Street shrugs over tele­com talks

The Pak Banker - - COMPANIES/BOSS -

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.

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