Verizon (VZ) Bests Its Unions

Verizon (VZ) managed to dodge a strike by about 65,000 of its workers. It would have crippled the company’s landline and broadband businesses and might have caused investors to dump the stock in favor of safer shares like AT&T (T).

According to the AP, "The pact, which must be ratified by union members, was hailed as a "breakthrough agreement in many ways" by Communications Workers of America President Larry Cohen." In other words, the unions got shellacked.

Verizon will contribute a fixed amount to the worker’s retirement pool, but that is the best of the deal for workers.

The raise that the unions managed to squeeze from the telecom company was only 10.5% over three years. In a period when inflation could move up over 5% a year, Verizon has cut a deal which is outstanding for its shareholders and remarkably poor for its workers.

Verizon has a very good chance of raising revenue in its landline business through its FiOS TV and broadband product. This should more than offset attrition in its tradition home and business phone operations. For margins in these businesses to stay relatively good, it needed the unions to relent to modest wage increases.

Verizon bested its unions and bolstered its profits.

Douglas A. McIntyre