Monday, January 31, 2005

SBC - AT&T Merger to Result in 13,000 Layoffs, Reduced CAPEX

Nearly 60% of cost synergies from SBC's proposed acquisition of AT&T are expected to come from headcount reductions, said senior officials from both companies in a conference call from the investment community. SBC currently has about 163,000 employees, while AT&T has 47,000. The layoffs are likely to affect about 13,000 employees. The job cuts are expected to include 550 engineering positions, 1,100 enterprise data ordering positions, 1,200 enterprise data provisioning positions, 1,500 enterprise care functions, 700 network management positions, 75 access management jobs and an estimated 2,600 job cuts in administrative roles, including legal, HR, finance, PR, advertising, etc. About 1,700 sales positions and 3,400 business operations personnel would also be eliminated in the merger.

In terms of CAPEX procurements, the companies see a 60% overlap between in vendor spend. In its earlier acquisitions (Pacific Bell, Ameritech and SNET), SBC has been able to extract a 10% to 12% supplier concession as it scaled up in size.

The advantages of scale are also expected to work in the merged company's advantage in terms of IP traffic. The merger would combine the largest backbone data provider with the largest local data provider (SBC's DSL and Project Lightspeed). The companies believe they will be positioned as the lowest cost provider.

SBC plans to leverage AT&T's investments in efficiency and automation against the joint company's entire Layer 2 customer base. New efficiencies would also be gained by building work processes around a single network view and not an artificially imposed long haul and local hierarchy.

The companies noted that AT&T's IP backbone carries an order of magnitude more traffic than SBC on a per employee basis. AT&T is over 3X more productive in supporting Frame Relay and ATM ports on a per employee basis. AT&T also carriers over 3X the long distance minutes of use on a per employee basis.

A webcast is archived on the SBC investor relations' website.