SBC Says It Will Cut 11,000 Jobs-- 3,000 in the State

Blaming government regulations for slack sales, SBC Communications Inc. said Thursday that it will cut an additional 11,000 jobs over the next six months, including approximately 3,000 in California, or almost 6% of its work force in the state.

The cuts come on top of the 10,000 jobs SBC already has eliminated this year. The San Antonio-based phone carrier, which owns San Francisco-based SBC Pacific Bell, employs 183,000 people in 13 states, including 51,470 workers in California.

SBC also will slash spending on network equipment by 30% to $5 billion to $6 billion in 2003, said Lora Watts, president of external affairs for SBC Pacific Bell.

SBC shares fell 69 cents to $21.90 on the New York Stock Exchange in regular trading, before the job cuts were announced. The stock’s close was the lowest since early 1995. In after-hours trading shares fell further, to $21.20.

SBC Chief Executive Edward E. Whitacre Jr. blamed “unrealistic and outmoded regulation” for a $1-billion drop in revenue in the first six months of 2002 compared with the same period last year.

Specifically, SBC wants federal and state regulators to let the company sell long-distance phone service, scale back regulation of its high-speed Internet access business and remove pricing constraints for how much it can charge other phone companies for access to its network.

SBC Pacific Bell last week won a mixed decision from California state officials on its application to sell long-distance service. The Public Utilities Commission decision, which paves the way for SBC PacBell to seek federal approval, lets the company carry long-distance calls that originate in California to cities in other states, but it may not be able to offer such service between cities within the state.

Analysts and consumer advocates disagree with SBC over whether the company’s troubles stem primarily from regulation.

“I would say the economy is the No. 1 reason” SBC faces financial problems, said Alex Mou, analyst with Hotovec, Pomeranz & Co. in San Francisco. “People are tightening their belts in this market, making fewer calls, adding on fewer services.”

Another big reason: Increased competition from cable companies that offer all-in-one packages of television, phone and Internet service. Wireless phone companies also cut into local phone business, Mou said. In addition, consumers who buy high-speed Internet access are eliminating phone lines that were dedicated to slower dial-up Internet service.

About two-thirds of the job cuts, which will be a combination of attrition and layoffs, will come from union employees and the remainder from management ranks, Watts said.

Asked whether the cuts would affect customer service, Watts said: “We will try to maintain our customer service levels, but we face some difficult decisions that could someday have an impact on our service.”

Consumer advocates argue that the layoffs are unnecessary.

“SBC is a profitable company in California,” said Regina Costa, telecommunications research director for the Utility Reform Network, a nonprofit consumer group based in San Francisco. “At the last public hearing, they said they had a 12.4% rate of return. They’re making money hand over fist. There’s no way that SBC’s economic performance in California justifies laying off 3,000 people.”

SBC posted a $7.2-billion profit in 2001 on $46 billion in sales.