Pacific Telesis Will Cut 11,000 Jobs Over Five Years : Labor: The company says the competition-caused reductions will come mainly from its Pacific Bell local telephone subsidiary.
Pacific Telesis Group said Thursday that it will pare 11,000 of its 69,000 jobs--16% of the work force--over the next five years to cut costs amid increased competition and new labor-saving technology.
The company, the state’s largest private employer, said the job cuts will come almost entirely from its Pacific Bell local telephone subsidiary. It said the reductions will be achieved through early-retirement incentives, retraining and attrition, but a job-seeking service will also be set up for employees accepting severance pay and leaving the company.
Which jobs will be axed--and how heavily the cuts will fall on Pacific Bell’s 28,000 Southern California employees--remains to be determined, a spokesman said.
The cuts are among the largest in a series of reductions that have pared 17,000 jobs from Pacific Telesis since it was created in 1984 as one of seven regional holding companies spun off from giant American Telephone & Telegraph as part of an antitrust settlement.
Pacific Telesis attributed the latest cuts to increased competition from upstart telephone firms that are chipping away at its monopoly and taking away some of its largest customers. In addition, new labor-saving telecommunications technology is making many jobs unneeded.
“One person can do the job of three or four,” observed Stuart Crane, an analyst with Gruntal & Co. in New York.
The cuts also stem from a new California regulatory system that provides Pacific Bell incentives to reduce costs to increase profits.
Carrying out the job-reduction program, including costs of early-retirement incentives, will not have a significant impact on profits, Pacific Telesis said. Analysts also noted that the cutback is not a sign of financial difficulty at the San Francisco-based firm, which is among the strongest of the so-called Baby Bells spun off from AT&T.;
All but 50 of the jobs to be cut will come from giant Pacific Bell. The other 50 jobs are to be cut during 1990 from Pacific Telesis’ present headquarters staff of about 400.
“Staffing requirements change over time in this dynamic industry,” said Pacific Bell President Phil Quigley. “What was appropriate in 1989 clearly will not be in 1994.”
Pacific Bell will lose about 7,600 non-salaried jobs and 3,400 management positions, he said. The job cuts do not affect Pacific Telesis’ unregulated ventures, which are grouped under PacTel Corp. These include PacTel Cellular in Costa Mesa, PacTel Paging, Pacific Telesis International, PacTel Business Systems and PacTel Properties.
Some layoffs will probably prove inevitable, the company acknowledged, but Pacific Telesis will try to minimize that by offering incentives for veteran employees to retire early by adding three years to both their service and their age in calculating pension benefits. That incentive trimmed a third of the management staff of Nevada Bell, a Pacific Telesis subsidiary that serves the Reno area. Other employees in jobs identified as surplus will be offered training for other posts or assignment to lower-ranking slots, the company said.
“Our goal is to operate even more efficiently in the 1990s, so we can deliver the maximum benefits to our customers and share-owners,” said Sam Ginn, Pacific Telesis’ chairman and chief executive. “Looking ahead, we remain keenly focused on our customers and the need to streamline operations so we can meet the challenges of increasing competition.”
Analysts generally welcomed the announcement but said it was no surprise.
“The driving force of the telecommunications industry is technology,” said analyst Crane of Gruntal & Co. “Switches today are gigantic computers that are highly automated. They do almost anything. So all you need is people to supervise these massive machines and keep an eye on them.”
Another incentive to cut costs stems from a new regulatory system in California that requires Pacific Bell to lower costs by 4.5% a year to reflect anticipated labor-saving improvements from new technology. But the new system also allows the company to earn more, if it can, than was possible under the old system, which set a tight limit on profits.
Moreover, despite their present monopoly in providing local telephone service, Pacific Bell and the other Baby Bells already are losing some business from major customers, mainly financial services firms. These companies are either erecting microwave towers to create their own private phone system, or contracting with Pacific Bell or a growing number of newcomers that provide private links for them.
Either way, this traffic bypasses the “public network” that most businesses and residential customers depend on.
This bypassing was encouraged in California and some other states, including New York, when regulators opened one area of the monopoly to competition--the lucrative high-speed transmission of data. Moreover, the California Public Utilities Commission this year will consider prying open other areas of the local monopoly. And the Federal Communications Commission and Congress are re-examining national cable television law, which presently forbids local phone companies to carry cable television in their service areas.
“We may see in the next decade, more than one (local) phone company serving an area,” suggested Steve Sazebari of the Dataquest research firm in San Jose. “In any case, they have to be more competitive in price and quality, so basically they have to cut costs.”
Pacific Bell and Nevada Bell serve nearly 22 million people in California and the Reno area.
