The Verizon strike's battle lines are drawn
In a strike that's shaping up to be one of the largest in the U.S. in recent years, nearly 40,000 unionized Verizon Communications (VZ) workers walked off the job on Wednesday morning, eight months after their last contract had expired. Negotiations have hit an impasse over efforts by the country's largest wireless company to make it easier to outsource jobs and to cut pension benefits.
"Meeting the needs of our customers is our top priority right now," said Raymond McConville, a company spokesman, adding Verizon expects service disruptions to be "minimal."
Keeping that pledge, however, may prove to be a challenge, especially in the event of a prolonged labor action.
"Customers are going to feel it," said Jeff Kagan, an independent telecommunications analyst. "It's not like it's going to be invisible to the marketplace."
New York-based Verizon has braced itself for the labor action, dispatching thousands of nonunion management workers to fill in for the striking employees. Some unionized workers crossed the picket lines that were organized throughout the Northeast on Wednesday, though Verizon declined to provide specifics. The strike originated in Verizon's declining wireline business, which includes traditional landline phone and Internet services.
Verizon's wireline business generated $37.7 billion in revenue in 2015, down 1.8 percent from the previous year, while its wireless unit saw sales rise about 5 percent to $91.6 billion. The company recently sold its wireline operations California, Florida and Texas to Frontier Communications (FTR) for $10.5 billion.
Both sides have accused the other of bargaining in bad faith. The Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW), which represent the striking workers, claim that Verizon has pushed profits ahead of people. Analysts and Verizon counter that the union's demands are unrealistic given that the company's market share in the traditional phone market, where it used to have a monopoly, now stands at about 30 percent.
"It's not like Verizon workers can continue to ignore the marketplace," said Kagan. "It means that there are going to be fewer workers needed. ... If (Verizon) could snap their fingers and have a wish come true, it would be to get rid of their wireline telephone business."
Officials from the CWA didn't respond to a request for comment.
Democratic presidential candidate Bernie Sanders addressed strikers as "brothers and sisters" at a Wednesday rally in New York City and attacked Verizon for its CEO pay among other things. The CWA has endorsed Sanders for president.
In response, Verizon chief executive Lowell McAdam denounced the Vermont senator's views as "contemptible." In an open letter published on LinkedIn, McAdam also said that "Our objective in these negotiations is to preserve good jobs with competitive wages and excellent benefits while addressing the needs of our ever-changing business."
Angelo Zino, an analyst with S&P Global Market Intelligence, expects Verizon's rivals in the wireless market to try using any strike-related service troubles to gain market share.
"Their competitors are probably jumping for joy, maybe licking their chops a bit to see if they can get some competitive advantage here," said Zino, who has a "hold" rating on Verizon. "Obviously, they need to resolve this situation as quickly as possible."
Verizon's relationship with its unionized workforce has been rocky for years and stands in contrast to peaceful relations at AT&T (T), the company's main telecom rival, according to Kate L. Bronfenbrenner, a senior lecturer at Cornell University's School of Industrial and Labor Relations.
"They have made clear their desire not to have any more of their workforce to be unionized, and they are aggressive in fighting the union on every count," she said. "AT&T believes that unionization has kept their business stable and have seen that as a positive."
Verizon rejects the notion that it's anti-union. "Does offering union technicians a significant wage increase to a pay and benefits package that's already worth more than $130,000 (per year) sound anti-union to you?" wrote spokesman McConville in an email.
Wall Street seems unhappy with the labor situation at Verizon. Its shares bucked the strong rally on Wednesday and fell 1.3 percent, closing at $51.29.