Telecom mergers as a window on job market

Four years ago, the telecom industry had the dubious distinction of leading the nation in layoffs. Now, it looks as if the industry, in the midst of a major consolidation, could be one of the top job cutters again.

But this time, employment specialists don't think the job prospects for all those supervisors, engineers, accountants, and personnel specialists will be as bleak. Unlike 2001, those out of work won't be fighting for jobs with unemployed dotcomers. The layoffs also come at a time when the economy is growing, not in recession. And online bulletin boards report they have job postings for people in the business.

In fact, the experience of laid-off telecomers could be a sign of the resurgence of the job market - something predicted for 2005.

"It is a much more sanguine time," says John Challenger of Challenger, Gray & Christmas, a Chicago outplacement firm. "Hopefully, people coming out of telecom with basic business skills will find them transferable from industry to industry."

Initially, a considerable number of résumés will be circulating from telecom employees. SBC Communications, which is acquiring AT&T, says it expects to cut about 13,000 jobs on top of another 12,000 that will be eliminated before the merger is finalized. The Verizon-MCI marriage could put 7,000 people on the unemployment line. And the Sprint-Nextel merger could put yet thousands more out of work, although no announcements have been made yet.

As the newly acquired companies settle in, there could be a ripple effect for their suppliers, law firms, and accountants. The mergers could also force smaller companies to combine, says Raul Martynek, CEO of Eureka Networks, a New York-based communications company. "It's the only way to survive in this new reality," he says.

Eureka, in fact, is an example of the shifting dynamics in the industry. Five years ago, the company emphasized growth. Today, says Mr. Martynek, the business model is predicated on efficiency. For example, in 2000, his company had 700 employees. After 9/11 and the telecom implosion, the company downsized to 75 employees - its size today.

"We're doing four times the revenue we did in those days," says Martynek, who has been acquiring companies himself. "There will be more synergies but also more cuts."

Few layoffs will come from the blue-collar side of the companies because these trades are highly unionized. "It's tough to lay them off," says Martynek.

Instead, most of the cuts are expected to be on the white-collar side. SBC has already said it would have 5,100 excess managers. An additional 5,100 will be cut from sales and other parts of customer support. Yet more layoffs are likely in human resources, regulatory, and lobbying operations.

Verizon said recently its staff reductions would focus on networking, legal, sales, and IT departments.

Executives who are running job bulletin boards are somewhat optimistic that those looking for work will find them. VetJobs.com, a bulletin board for former military personnel, has posted 227 telecom jobs. "A lot of telecom skills are transferable in administration, human resources, marketing, and sales," says Ted Daywalt, CEO of the Atlanta-based organization. However, he adds, "it may take a 30 to 40 percent pay cut to remain employed."

There may also be new opportunities within the merged companies themselves. Paul Kowal, a customer-service consultant in Cambridge, Mass., says the combined behemoths will need more people helping other people. "The customers will have as many questions and issues as they used to, so if you double your subscriber base, you need to double your customer service to reduce churn," or people moving to other companies for better service.

In addition, SBC and other telecoms are developing plans to offer cable service to their huge subscriber base. For the most part, they haven't hired staff yet.

"If you start to add cable service and other broadband packages, there is an opportunity to sell and a need to maintain the service," says Mr. Kowal, who is president of Kowal & Associates.

The phone companies are also expanding their services to include streaming video on cellphones. News organizations, such as ABC News, are trying to sell subscriptions to 24-hour news programming in this format. And during the Super Bowl, for example, some cellphone subscribers could receive video updates of the game. Moreover, new cars are becoming equipped with telecommunications devices that allow passengers to watch movies and play games.

"Companies will have to gear up, and it results in more opportunities," says Kowal.

Some of the companies, such as Verizon, are still installing fiber-optic cable to individual homes. There are reports the company will be hiring up to 5,000 people to help it market and maintain this system.

"There are pockets in telecom that will be hiring," says Martynek. One of those areas is likely to be new ways to use electronic devices in homes. More appliances, such as ovens, will be controlled remotely, perhaps through a cellphone. "They are already testing the appliances where it will keep the food cold until a certain time and then start to warm it," says Kowal. "But you will also be able to move the cooking time up or down remotely."

This future market is called "device control." With the fiber-optic cable going to a home, Kowal speculates, it could mean the phone company could get into the home-protection business, again competing with cable companies.