Update: Analysts say Verizon, unions face pressure to settle by July
"Beer and barbecues" on CWA, IBEW picket lines
TUESDAY Update: Verizon will likely have to sweeten its "last, final offer" from April 28 to get new labor contracts approved by striking workers, writes analyst Amy Yong in a report to clients of Macquarie Securities. The proposal, so far, includes pay increases of around 7.5%, plus higher 401K retirement-plan contributions.
The strike has hurt new Verizon Internet sign-ups and will force higher repair and maintenance costs, Yong argues. Verizon wants more flexibility to use cheap, non-union workers "to lower costs" for its shrinking wired phone business. The company last week resumed installations, but will likely be nearly 50,000 accounts down from projections, she added. Yong estimates the cost of the strike to Verizon at up to $80 million, and compared it to the impact of Hurricane Irene in 2011.
MONDAY: Re the seven-week strike against Verizon by nearly 40,000 CWA and IBEW union members: After talking to company and union leaders, "we continue to expect the strike to end relatively soon," but it will still reduce this year's earnings for Verizon by around $200M, or a nickel a share, writes New York-based telecom analyst Barry Sine, in a report to clients of Philadelphia-based Drexel, Hamilton & Co.
Both labor and management say "a solution is possible," likely in June, Sine added. The bosses are hurting, but not a lot, so far, while union members at larger Verizon sites "seem to be having fun picketing in the Spring sunshine with on-site beer and barbecues."
He adds: "While union healthcare benefits ceased on May 1, workers can
retroactively sign up for benefits under COBRA with benefits taking effect up
to 60 days prior. So even those incurring significant costs can wait until July 1."
Verizon will lose around 150,000 FiOS video and data customers this Spring as a result of the strike, "as the company's management and contractor workforce focuses on repairs, with few installations getting done." Verizon adds were down anyway, due to asset sales in California, Florida and Texas. The company should gain about 75,000 in the summer quarter after the strike is settled. Verizon is likely to focus in future on new commercial accounts.
"The net savings of avoiding union benefit payments after May 1, and wages since the start of the strike, will roughly offset increased overtime for supervisors and payments to contractors, so we expect no impact on profit margins. However, with more focus on repairs, and less on installs, more operating costs will be expensed and less capitalized," Sine adds.