Four months after unveiling plans to divide itself into three separate companies, AT&T, the American telecommunications giant, served notice yesterday that it is eliminating 40,000 jobs, equal to 13 per cent of its workforce.
AT&T, which currently employs 300,000 worldwide, will take a $6bn (pounds 4bn) pre-tax charge in the fourth quarter to pay for the redundancies as well as for facility closures and some asset-value write-downs. It aims to achieve 70 per cent of the lay-offs this year and the remainder after three years.
While there were no details on where most of the job-losses would occur, a company spokeswoman said 85 per cent of them would be within the US. She added: "While some percentage of it will not be in the US, we are not in a position to say what the impact will be in specific places."However, she was unable to rule out the possibility of some job cuts in AT&T's British operations. "As far as the UK is concerned, we just don't know yet," she said.
Roughly three quarters of the lay-offs will be involuntary. Only about 6,500 AT&T employees responded to a voluntary redundancy package offered by the company. Around 4,000 people may leave the AT&T payroll as units are sold-off as part of the overall break-up.
Of the three entities that will emerge from the break-up - the biggest in corporate history - the new AT&T, that will continue to provide telecommunications services, will suffer the largest number of job-cuts. Also affected, however, will be the workforce of its new equipment division.
Global Information Solutions (GIS), the computer arm of AT&T created after the 1991 buy-out of the former NCR Corporation, is not affected, however. GIS independently announced in September 8,500 redundancies, of which about half have already been implemented.
On Wall Street, where AT&T is the most widely-held stock in the US, investors appeared pleased by the news. Shares in AT&T jumped sharply higher, up $3 to $673/4 at lunchtime.
AT&T's chairman, Robert Allen, expressed regret at the lay-offs. "I truly wish we didn't have to do this downsizing. I understand how wrenching it will be for employees and their families. But the actions we are announcing today are absolutely essential if our businesses are to be competitive," he said in a memo to workers. "This is a key milestone that puts us right on track in our plan to create three new companies that will be positioned as strongly as possible to succeed in their markets."
Roughly $1.7bn of the fourth-quarter charge will arise from the writing down of the values of some of AT&T's assets, most notably that of Unitel, a Canadian communications venture. The closing down, selling or consolidation of AT&T facilities worldwide is to account for $1.1bn.
The biggest component of the charge, $2.6bn, will come from lay-offs, however. The company conceded that the state of New Jersey in the US, where 48,000 AT&T workers are based, will be worst affected.