Verizon Offers Buyout to Workers

Zacks

Wireless leader Verizon Communications Inc. (VZ) is offering voluntary buyout to 1,700 workers. They will primarily include technicians and call-center employees from the wireline segment.

Verizon plans to cut employees only in the wireline segment. The company is making efforts to reduce cost in the wireline as the division is struggling with persistent losses in access lines that are weighing on its revenues and margins.

The move comes after several months of talks over new contracts with labor unions, which went on strike last August. About 45,000 employees, represented by Communications Workers of America and International Brotherhood of Electrical Workers, went on strike after Verizon pushed them for cuts in health benefits and pension freezes. Additionally, Verizon has surplus employees in certain parts of the wireline business.

Out of Verizon’s 192,000 total workers, 102,000 do not belong to any union and are employed in its wireless division, a joint venture with Vodafone Group Plc (VOD). The division will not be affected by the buyout offers.

Verizon remains the leading provider of wireless voice and data communication services in the U.S. as it continues to expand its 3G and 4G Long-Term Evolution mobile broadband networks. Further, Verzion’s wireless growth prospects remain strong, driven by customer growth, higher smartphone adoption and the sale of Apple Inc.’s (AAPL) iPhone that will lead to improved revenue.

The voluntary buyout offer applies to less than 1% of the total Verizon workforce and about 2% of the wireline workers. Verizon expects the affected employees to leave in early July. The company will lay off employees if only a few accept the voluntary package.

We remain on the sidelines for now and will carefully watch the financial impact of the buyout plan in both the short and long term. As a result, we are maintaining our long-term Neutral recommendation on Verizon. Currently, the stock retains the Zacks #3 (Hold) Rank for the short term (1–3 months).

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