AT&T to cut 12,000 jobs and slash spending

NEW YORK (Reuters) – Top U.S. phone company AT&T Inc. said it would eliminate 12,000 jobs, or about 4 percent of its workforce, a fresh wave of cuts to cope with an economic downturn that has exacerbated a decline in traditional phone sales. AT&T said on Thursday it will cut the jobs over the remainder of 2008 and 2009, and take a charge of about $600 million in this year's fourth quarter for severance. The company attributed the job cuts to "economic pressures, a changing business mix and a more streamlined organizational structure." The carrier also plans to cut its 2009 capital spending from this year's levels, though actual spending plans have not yet been finalized. AT&T said it would provide details on its capital spending in late January. The cuts come as the company struggles with declining landline sales, as many consumers switch to wireless or alternative, cheaper services offered by cable and Internet companies. Shares of AT&T were up 1.4 percent to $29.53 in early trading on the New York Stock Exchange. "While the weak macro environment is taking its toll on the business, we believe the cuts show the large telcos... have levers they can pull to partially offset the effects of the slowdown," said UBS analyst John Hodulik.

Chris Larsen, Credit Suisse analyst added, "The job cuts should not be surprising given the weakening trends in the residential wireline business." He forecast the company would spend $17 billion in 2009, down 12 percent from 2008 levels. The move follows AT&T's April announcement of cutting 4,600 jobs, mostly in management, as well as a three-year plan disclosed at the end of last year to cut 10,000 jobs. Its third-quarter results showed wireline voice revenue fell more than 8 percent from a year earlier. And while its partnership with Apple Inc's iPhone has helped it win wireless customers, the subsidies to buyers in exchange for subscriptions has hurt its profit margins. AT&T has been trying to maintain landline subscribers by investing in new, high-speed Internet and video services. Shares of AT&T have dropped by about 30 percent so far this year, as investors have questioned whether the company would be able to make up for the rapid decline in traditional wireline customers. In a statement on Thursday, AT&T said that while it is cutting its overall workforce, it is adding jobs in areas such as wireless, video and broadband. Shares in network equipment makers, or suppliers to phone companies like AT&T, fell in early trade. Cisco Systems fell 13 cents to $15.78, Juniper Networks fell 4 percent to $16.00, while ADC Telecom fell 3.5 percent to $6.62. AT&T is just one of several companies announcing job cuts on Thursday. Viacom Inc said it would eliminate 7 percent of its workforce, or 850 jobs. Swiss bank Credit Suisse said was cutting 11 percent of its workforce, or 5,300 jobs, while Adobe Systems announced on Wednesday that it would eliminate 8 percent of its staff, or 600 jobs.