Will AT&T Strike Out?

Few statements could have been met with as much incredulity as when AT&T (NYS: T) last year touted its proposed merger with T-Mobile as being a job-creation vehicle. And equally far-fetched was when the union representing many of AT&T's 256,000 employees, the Communications Workers of America, echoed management's claim.

The CWA said last summer that the merger would create 100,000 new jobs. The CWA president even testified on the benefits of the deal before Congress.

But that increased employment claim raised the eyebrows of Albert Foer, president of the American Antitrust Institute. "I've never seen a merger that has produced new jobs," he said.

Common sense alone would indicate that redundant positions in sales, engineering, and customer relations would certainly be ripe for elimination.

No good deed shall go unpunished
So how does AT&T reward its union employees for working with the company in its attempt to suspend the disbelief of regulators, Congress, and the public over the benefits of the merger?

By letting them hang out to dry over current contract negotiations.

Half of the 80,000 AT&T employees represented by the CWA work in the telecom's wireline business, and they are still waiting, according to the union, for AT&T to begin holding "serious" talks. Through a CWA website, the union told its rank-and-file membership: "Both sides are still far apart. The pace of progress is slow and frustrating."

So far the sides have managed to avoid a walkout, even though 93% of the union members who voted authorized the CWA leadership to call a strike. The last contract expired just after midnight last Saturday.

The snag in negotiations appears to hang on a proposed increase in union employees' health-care contributions and cuts to the workers' pensions. AT&T said on its website that it wants a contract which would "enable a competitive cost structure reflecting current market realities."

Those market realities must refer to the trend of customers moving away from fixed-line phone service to that of wireless-only communications.

The changing landscape
(NYS: VZ) saw 45,000 of its union wireline workers strike last August, the first strike at Verizon in 11 years. That walkout lasted two weeks, and it, along with storm damage, made an impact on the wireline segment's bottom line.

But, as noted in Verizon's fourth-quarter 2011 earnings report, its wireless business is made up almost entirely of non-union employees. Couple this with the aforementioned trend of customers choosing wireless over wireline, and you may have a clue as to how hard a line carriers are willing to take in contract negotiations with their union-represented wireline employees.

A stormy union year
More than half of AT&T's employees are covered by union contracts. According to the company's 2012 annual report, contracts covering 120,000 workers will expire in 2012. Given that, the CWA -- no matter how far it bent over backwards last summer to lobby for the AT&T/T-Mobile merger -- should expect no quarter from management in current and future negotiations. And investors should expect more telecom strike threats in the headlines this year.

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At the time thisarticle was published Fool contributorDan Radovskyowns shares in AT&T. The Motley Fool has adisclosure policy.
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