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Verizon Faces Strike Threat from Cable, Wireline Workforce

Verizon Communications Inc.’s VZ workers unions, representing its wireline and cable workers, have threatened to call a strike, starting tomorrow, April 13. The company and the unions representing the workforce, namely The Communications Workers of America (CWA) and International Brotherhood of Electrical Workers, are currently at a stalemate over a new labor contract. The company’s wireline employees have been working out of contract since August last year. Verizon had faced a similar issue in 2011 where a breakdown in contract had led to a labor strike.

The Issue

The unions have alleged that Verizon is looking to freeze pensions and wants ease in the process of executing layoffs. Moreover, as per the contention of the union, Verizon seeks to rely less on permanent workforce and more on contract-based labor, which will allow it to have higher degree of flexibility to manage its employer base. Verizon and the unions, representing workers from states such as Massachusetts, Virginia, New York and Rhode Island, have been engaged in negotiating over the company’s plan to cut healthcare and pension-related benefits over a three-year period.

Verizon, on the other hand, said that it is fully prepared for a strike and has trained its non-union employees to cope with issues, if any. The company has guaranteed full, uncompromised service to its customers in the event of a strike. Out of the 178,000-strong workforce of the company, about 39,000 are unionized.

The Bottom Line

It is very important for Verizon to ensure smooth operations and continuing service even in the face of a strike. Cable and landline revenues, although not responsible for the bigger pie of revenues, are directly related to Verizon’s business customers. Verizon is already facing competitive threat from its telecom rivals like AT&T Inc. T, T-Mobile US Inc. TMUS and Sprint Corp. S, and any disruption in services can prove to be a catastrophe for the company, making customer retention more challenging. Will the company’s Business Continuity Plans (BCP) overcome such adverse events, going forward? For now, we leave it for time to answer.

Verizon currently carries a Zacks Rank #3 (Hold).

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