Tech by VICE

AT&T Preps for New Layoffs Despite Billions in Tax Breaks and Regulatory Favors

Internal documents obtained by Motherboard show that the company is preparing for layoffs—megamergers, deregulation, and tax breaks aren’t providing the public benefits AT&T promised.

by Karl Bode
Jan 8 2019, 8:21pm

Image: Shutterstock

AT&T is preparing for yet another significant round of layoffs according to internal documents obtained by Motherboard. The staff reductions come despite billions in tax breaks and regulatory favors AT&T promised would dramatically boost both investment and job creation.

A source at AT&T who asked to remain anonymous because they were not authorized to speak publicly told Motherboard that company leadership is planning what it’s calling a “geographic rationalization” and employment “surplus” reduction that will consolidate some aspects of AT&T operations in 10 major operational hubs in New York, California, Texas, New Jersey, Washington State, Colorado, Georgia, Illinois, Missouri, and Washington, DC. A spokesperson for AT&T confirmed to Motherboard that it is planning to “adjust” its workforce.

While AT&T has yet to come up with a final, formal internal tally for this new round of looming layoffs, AT&T employees worry the staff reductions could prove to be significant, especially outside of these core areas. Managers are being briefed on the plans now, though AT&T isn’t expected to formally announce the specifics until they’re finalized later this month.

The staff reductions were first announced in an internal memo sent to managers last Friday by Jeff McElfresh, President, Technology & Operations at AT&T.

“To win in this new world, we must continue to lower costs and keep getting faster, leaner, and more agile,” McElfresh told employees. “This includes reductions in our organization, and others across the company, which will begin later this month and take place over several months.”

The ongoing consolidation isn’t surprising for a company that’s attempting to pivot from curmudgeonly-old phone company to sexy new media brand via its acquisition of Time Warner. AT&T’s desperate to shed old DSL customers it doesn’t want to upgrade, and instead want to utilize those resources for its pivot into streaming video over wireless.

This news comes in the wake of AT&T receiving a $20 billion windfall last quarter courtesy of the Trump administration tax breaks. That’s in addition to the friendlier environment AT&T finds itself in as a result of the Trump administration’s assault on consumer protections ranging from net neutrality to broadband privacy guidelines.

In a memo of talking points advising managers on how to address employee concerns obtained by Motherboard, AT&T attempts to explain away the disconnect between the company’s words and its actions.

“What we’ve said was that AT&T planned to invest an additional $1 billion in the United States this year as a result of tax reform, and that research shows that every $1 billion in capital invested in the telecom industry creates about 7,000 good-paying jobs for American workers, across the broader economy,” the memo states.

But wireless sector investment actually declined last year, with most of the savings from regulatory favors and tax breaks going instead toward stock buybacks, executive compensation, or to pay off the mammoth debt accumulated by a series of AT&T megamergers many consumers and employees didn’t want in the first place, critics charge.

When contacted for comment, AT&T confirmed that the company was planning another round of staff reductions, but insisted that any layoffs would only impact a very small portion of the company’s overall workforce.

“We are hiring to meet the needs of the growth areas of our business,” the company told Motherboard. “In fact, we hired more than 20,000 new employees last year and more than 17,000 the year before. In cases where we do have to adjust our workforce, we take steps to lessen the effect on employees.”

But outside analysis and union officials contest these numbers.

AT&T’s offshoring efforts have resulted in 44 closed call centers and 16,000 lost US jobs since 2011. And despite AT&T CEO Randall Stephen promising 7,000 high-paying jobs thanks to the Trump tax cuts, a new report released this week by the Communications Workers of America claims 10,700 US-based union jobs have been eliminated in the last year alone.

Thanks to a reduction of future AT&T tax liabilities in the Tax Cuts and Jobs Act, AT&T saw profits of $29.5 billion in 2017, up from $13 billion in 2016. The permanently-lower tax rate should net AT&T an additional $3 billion annually in perpetuity, the CWA report states. Similar windfalls have been enjoyed by Verizon, which has also responded not with raises or hiring, but staff reductions.

AT&T initially insisted it had doled out $1,000 bonuses to 200,000 employees as a direct result of the Trump tax cuts. It was later revealed that these bonuses had already been negotiated as part of unrelated union negotiations. Even then, the $200 million expenditure from the bonuses amounted to just 7 percent of AT&T’s expected annual benefit from the cuts, the report found.

"Despite its strong financial position and promises to invest in its American workforce, AT&T has shifted much of its employment away from good, family-supporting jobs and towards a low-wage model that undermines the quality of its customer service and its standing as a good corporate citizen," the CWA said in this week’s report.

Granted none of this is really new. Both AT&T and Verizon were widely criticized back in 2014 when it was similarly found that telecom tax breaks didn’t result in increased investment or job creation. AT&T’s promises of “synergies” in the wake of its $85 billion acquisition of Time Warner have proven to be similarly hollow. And the industry’s false claims regarding the benefits of killing net neutrality are well documented.

Someday, younger generations may want to seriously reconsider America’s historical obsession with blindly throwing tax breaks, subsidies, and deregulatory favors at companies in exchange for benefits that seem to never actually materialize. Until then, we seem intent on repeating the same mistakes, having learned little to nothing from experience.