GTE Plans Nationwide Restructuring : Possible Layoffs at Thousand Oaks Office
Is GTE getting ready to announce layoffs at its California headquarters in Thousand Oaks?
Employees think so. Analysts on Wall Street think so.
For the moment, GTE won’t say what is going to happen.
In March, GTE Corp., the Stamford, Conn.-based telecommunications giant, announced plans to consolidate its seven local phone companies--including GTE California in Thousand Oaks--which provide local telephone service in 31 states.
To reduce costs, GTE Corp. is expected to move most general office functions--such as billing and marketing--to a central headquarters and four regional offices.
GTE said it will announce the restructured office locations by mid-June. At the moment, committees of GTE executives are sequestered at the GTE Management Training Center in Norwalk, Conn., deciding the fates of offices and employees around the country.
“I think we can make our corporation and all of our operations significantly more cost-effective,” said James Broadhead, president of GTE telephone operations and the executive overseeing the consolidation program. “We’re trying to ensure we are going to be a cost-effective corporation.”
Dallas Area Possible Hub
GTE, which made a profit of $1.1 billion on sales of $15.4 billion in 1987, refuses to say how much it wants to cut in costs. But Frank Governali, a Kidder Peabody analyst, said the target is between $300 million and $400 million.
Analysts said GTE’s Thousand Oaks office--which employs 2,450 administrative and engineering workers--isn’t in the running for the new headquarters office. Instead, analysts expect GTE to make the Dallas area the hub of its telephone operations. GTE already has several operations in the Dallas area, including the GTE InfoMart exhibition hall, where customers are flown in to discuss telephone services.
Dallas offers other advantages as a headquarters location. “The real estate is cheap, it has a big airport and it’s in a central time zone,” said Robert Morris, a Prudential Bache Securities analyst.
So analysts expect that some of GTE’s Thousand Oaks employees will be laid off and others transferred. Nobody--from GTE or Wall Street--is willing to venture a guess as to how many.
“Could we do it with zero people? I don’t think so,” said Tom Leweck, a GTE spokesman in Thousand Oaks. “Do we need all 2,000? Obviously, some of those can be consolidated.”
Leweck added that the Thousand Oaks employees “who provide service directly to the customers will be pretty much unaffected by this restructuring.”
Analysts say GTE California will be named the regional headquarters for GTE in the Western United States, which will include Hawaii, California and the Northwest. If so, it would lessen the severity of any layoffs at the Thousand Oaks operation.
“I would expect GTE California to be left a lot more whole than, say, the GTE operation in Indianapolis,” said Jack Grubman, an analyst with PaineWebber.
Charles Crain, president of GTE Hawaiian Tel, has been named president of the western territory. Hawaiian Tel, in a press release, said headquarters will be “likely centered in California.” But a spokesman for GTE in Stamford denied that any regional headquarters have been selected.
Some GTE California employees already are looking for other jobs. “We’re getting a fair number of people at GTE saying they’re interested in making a move because of the reorganization,” said William Mangum, president of Thomas Mangum Co., an executive recruiting firm in Los Angeles. “That would be expected.”
Mangum reported getting 15 to 20 inquiries from GTE managers in the last two weeks.
GTE Corp. is under pressure to cut costs for a variety of reasons. The company is taking its knocks from a 50-50 investment with United Telecommunications in U.S. Sprint, a long-distance phone carrier that is a distant third in the long-distance race behind AT&T; and MCI. In 1987, Sprint lost $1.1 billion, much of it due to billing problems.
GTE’s own telephone operations also have gotten mixed reviews. “GTE is not an efficient telephone company compared to a Bell Atlantic, Ameritech or other regional phone companies,” said Grubman. “They have a long way to go.”
Home Shopping Network, the video shopping company, has sued GTE and its Florida subsidiary for $1.5 billion, claiming that poor phone service and faulty equipment cost HSN at least $500 million in orders. “GTE advertises, ‘Let us do it all.’ And we let them do it all. And they did us in,” said an embittered Roy Speer, HSN chairman. GTE denies the charge.
As for GTE California, there is little doubt that it soon will be a leaner company. It has to be.
Consider that GTE California charges residential customers higher rates than its major competitor, Pacific Bell. GTE charges a flat service rate to residential customers of $9.75 a month; Pac Bell charges $8.25. “There is no way we can be price-competitive if our costs are higher. To ensure our prices can be competitive, we have got to reduce our costs,” said Leweck.
Not all of GTE California’s business customers are happy with the company’s service either. When GTE California asked its large business customers in 1987 if they were satisfied with their phone service, only 64% said they were, according to an internal company survey. By comparison, Pac Bell claims a recent survey showed that 98% of its big business customers were happy with the company’s service.
“We feel we have significant progress yet to make in satisfying our business customers,” said Leweck. “We’re not at all pleased or satisfied with our results.”
To make matters worse, GTE California is facing a big rate reduction. Last year, GTE California made a profit of $362 million on sales of $2.9 billion. But the field staff for the state’s Public Utilities Commission thinks that GTE California’s prices are too high and has recommended a $530-million rate reduction.
GTE California has appealed the rate reduction and said that it expects the commission’s final decision within 45 days. “We are certainly confident the commission will not do something that would put the company in financial jeopardy,” said David Anderson, GTE California’s president.
Grubman and Morris, among others, think that GTE California’s rate reduction will come in at $150 million to $200 million.
Because GTE California accounts for 25% of all GTE Corp.’s telephone operations revenue, a steep rate reduction would severely impact the parent company. As a result, Marianne Bye, an analyst with Mabon, Nugent & Co. in New York, has trimmed her 1988 earnings estimates for GTE Corp. by 30 cents to $3.60 per share.
“The rate reduction is one reason GTE’s stock hasn’t done well,” said Morris. GTE’s stock closed Monday at $35.75 per share, down from its 52-week high of $44.75.
Meanwhile, employees at GTE California’s lavish Thousand Oaks complex are hearing a lot these days about reductions--rate reductions and job reductions. The headquarters building and 85-acre site were purchased from Prudential Insurance Co. of America for $67.5 million, and GTE California moved there in August, 1985. The spacious building is a mixture of glass and granite. Inside, electronic robots deliver the office mail. Anderson even has a shower in his office.
It’s an attractive place to work, but it doesn’t alter the worried mood among employees. “There’s no question some people are preparing resumes,” said GTE spokesman Leweck.
