Economic impact of Verizon strike continues, deepens

Verizon’s second quarter revenue will fall by $343 million, according to Wells Fargo estimates. The bank’s estimate comes after Verizon reported new FiOS installations plummeted during the workers’ strike. As FierceTelecom put it, the strike “torpedoes” Verizon’s 2Q earnings.


"Management recently indicated that install and order activity for FiOS has ‘significantly dropped’ as employees have been primarily focused on repair and maintenance,” said Jennifer Fritzsche, senior analyst for Wells Fargo. “Accordingly, we are cutting our Q2 and FY'16 wireline revenue estimates by $343MM and $826MM, respectively."


The lower revenue estimate comes as Verizon management signals concerns that it’s losing customers. Fran Shammo, executive vice president and chief financial officer of Verizon, spoke during the MoffettNathanson Media and Communications Summit, discussing long-term customer loss due to the strike. "Our [FiOS] installs and new orders have significantly dropped," Shammo said.  "The piece of FiOS subscribers that we will never get back are the people who move. A person who moves into a new home wants service today and if you can't deliver it they're going somewhere else so they're probably lost for two years."


Speed Matters recently reported that the Verizon workers’ strike is delaying Verizon’s acquisition of XO Communications’ fiber network, a $1.8 billion dollar deal announced in February. The strike has been hurting company profits since it began on April 13.


Workers represented by the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW) have been on strike for more than a month following ten months of intensive negotiations to reach a fair contract. Verizon’s attempt to replace skilled, trained frontline technicians and customer service representatives with lawyers, accountants, and managers has failed. Verizon customers are experiencing installation delays and the company warned its shareholders that second quarter profits could be lower than expected, a warning reiterated by the Wells Fargo estimate.


CWA and IBEW members have been supported by local elected officials and a union strike fund. And this week almost 90 members of Congress signed a statement supporting the striking workers. “We urge the parties to negotiate in good faith and agree to a fair contract,” the statement read. “We firmly believe it is in the public interest to protect middle class jobs, reduce outsourcing and offshoring, and ensure high quality telecommunications services to the public.”

Strike torpedoes Verizon's Q2 FiOS earnings estimates due to drop in installations (FierceTelecom, May 20, 2016)

 

The Verizon Worker Strike Is Starting to Affect Sales (Fortune, May 19, 2016)

 

Verizon strike hurting company profits (Speed Matters, Apr. 25, 2016)

 

Verizon strike delays XO acquisition (Speed Matters, May 17, 2016)

 

CWA and IBEW set to go on strike at Verizon (Speed Matters, Apr. 11, 2016)

 

Verizon strike gains strength, support from presidential candidates and elected officials (Speed Matters, Apr. 19, 2016)

 

Nearly 90 Members Issue Joint Statement on Verizon Labor Negotiations (US House, May 19, 2016)