Verizon's Other News

The largest local phone company in America is facing a possible strike this weekend, though such talk hasn't impacted the stock much today. Nevertheless, the company's success in offering long distance services in New York is an important step towards the bundled telecom services most of us will receive in the future.

By Chris Rugaber (TMF RFK)
August 4, 2000

Most of the news today in the major media regarding Verizon (NYSE: VZ), the communications company formed by the merger of local phone companies Bell Atlantic and GTE, is about a possible strike by some of its workers. While that story is important, investors interested in the telecom sector should pay just as much attention to the company's announcement yesterday that it has already signed up 1 million long-distance customers in New York.

First, the strike
About 85,000 of Verizon's 260,000 employees, mostly from the Bell Atlantic side of things, are threatening to go on strike as of midnight Saturday, as negotiations for a new contract aren't making much progress. While this would affect service requests and installations, phone service generally shouldn't be interrupted. The Wall Street Journal reports that "since 98% of calls are automated, disruptions from a walkout aren't expected to be severe in the short term." Verizon's stock wasn't much bothered, down about 3% this afternoon, to $46 9/16, on below-average volume.

Interestingly, as The Washington Post noted, the dispute is a direct result of some of telecom's current trends. The two main sticking points appear to be the overtime -- allegedly unscheduled -- that customer service and installation personnel are logging in response to heavy demand for new services and customer complaints and the unions' desire to organize employees in Verizon's fast-growing wireless division.

Approximately 80% of the local telephone workers from the old Bell Atlantic are unionized, while fewer than 50 -- not 50%, but 50 -- of Verizon Wireless' 32,000 workers are union members. Since wireless is where the growth is, it makes the unions' interest in organizing those workers that much more urgent. The two sides are in a dispute over what procedure will be used to determine if Verizon Wireless' employees are in favor of union organizing.

Verizon's bundled services
Investors should probably pay more attention to Verizon's announcement yesterday that the company signed up its one-millionth long-distance customer in New York state since receiving regulatory approval to offer the service late last year. The company is five months ahead of schedule, as its goal was to reach the one million mark by the end of this year. Verizon Long Distance President Maura Breen stated in a Bloomberg interview that their customers are "predominantly consumers," though they are signing up business clients as well. The company now has about 14% of the New York long distance market. Verizon will donate $1 million to five New York charities to celebrate the milestone.

Verizon's efforts are part of the ongoing bundling of telecom services by both the consolidated Regional Bell Operating Companies (RBOCs) such as Verizon and SBC Communications (NYSE: SBC), and the big long-distance providers such as AT&T (NYSE: T), Worldcom (Nasdaq: WCOM), and Sprint (Nasdaq: FON). Whether a company's roots are in the RBOC or long-distance worlds, in order to compete in the near future they must offer a range of telecom services to customers, including local and long distance, wireless, and high-speed Internet access. That's why companies like Verizon are pushing into long distance, despite the fact that it is becoming more of a commodity business and is providing little growth to the current providers.

In addition, by offering a suite of services, companies can also consolidate billing. According to a Goldman Sachs report, Verizon now sends one bill to customers in Manhattan, Queens, and two New York counties, for their local, long distance, Internet access and wireless services.

Expansion plans and an earnings report
Verizon will report earnings for the first time as a combined company next week, on August 8th. The company will provide additional information about its long distance business at that time, perhaps including new customer targets, and also provide information on the financial impact of the long-distance business.

Verizon is taking steps to offer long-distance service in other Northeastern states. The company has already filed for FCC approval in Connecticut and plans to file in Massachusetts in the fourth quarter of this year, and in New Jersey and Pennsylvania next year. While the RBOCs are frequently tagged as slow, bureaucratic companies, Verizon is making progress nevertheless.

Your Turn:
What do you think of Verizon's latest announcements? Let us know on our Verizon Discussion Board.

Related Links:

Feedback about News & Commentary? Please send mail to news@fool.com.