SBC to cut 11,000 jobs, capital spending

Jessica Hall

PHILADELPHIA: Announcing their cost cutting measures, the Texas based company said that about 9,000 of the 11,000 job cuts will occur in the fourth quarter, with the balance occurring primarily in early 2003. These new cuts are in addition to the 10,000 jobs SBC has eliminated year-to-date through August.

Local telephone companies have been slammed by the weak economy and a shift to wireless telephones and electronic mail, which has reduced the number of telephone access lines in service.

SBC, the No. 2 U.S. local telephone company said, it expects about one-third of the reductions will come from management employees and the remaining from non-management positions across the 13 states served by SBC.

The company expects to take related accounting charges in both the third and fourth quarters, but it declined to elaborate on the size of the expected charges.

SBC, the dominant local telephone company in the U.S. Midwest and Southwest, also said it would slash its capital spending budget for 2003 to about $5 billion to $6 billion. That compares with its 2002 capital spending budget of slightly less than $8 billion.

BABY BELLS AND RIVALS BATTLE OVER REGULATIONS

SBC and the other Baby Bells created by the 1984 breakup of AT&T Corp. contend they face burdensome regulatory pressures since they must give competitors access to their telephone networks at reduced costs.

"Instead of subsidizing prices for average consumers, we now subsidize competitors who in turn siphon revenues out of the market," SBC Chairman Edward Whitacre said in a statement.

Wholesale prices for network components set by state regulators are below cost, and in some cases up to 60 percent below retail rates, SBC said. Rivals then use the discounted network access to target lucrative business customers and high-end residential customers, leaving SBC to serve basic residential users, the company said.

The Baby Bells are required to open their local telephone markets to rivals before being allowed to provide long-distance telephone service to customers in their home regions.

SBC has lost nearly 3 million retail access lines year-to-date through August. Still, it earned $1.8 billion on revenues of $13.1 billion in the second quarter.

Smaller local phone companies, and long-distance carriers trying to enter the local market, however, argue that the Baby Bells have stalled, and put up road blocks to make it difficult for rivals to compete and challenge the Bells' near-monopoly status.

"Instead of blaming competition and regulation for their purported financial woes, SBC should look at its own business failures," said AT&T spokeswoman Claudia Jones.

"It's paid an astonishing $1 billion in announced penalties and overcharges since the passage of the Telecom Act, and has a dismal record of gaining long distance approval in the Ameritech region," Jones said.

SBC Ameritech is a regional affiliate of SBC Communications. In May, SBC said it would pay $3.6 million to end two probes into inaccurate information provided to the Federal Commission on some long-distance applications.

Last week, SBC filed for permission to offer long-distance telephone and data services in California, a more than $10 billion market.

(C) Reuters Ltd