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Layoffs, anxiety at AT&T Wireless

By Tricia Duryee
Seattle Times Eastside business reporter

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For months, employees at AT&T Wireless have worked under the weight of setbacks, uncertainty and, more recently, the likely sale of the Redmond-based wireless giant.

Now they face what's been expected for some time: layoffs.

Over the next two weeks, the nation's third-largest wireless carrier plans to trim an unspecified number of jobs from its information-technology group, said company spokesman Peter Rowe. Most of the cuts will occur at its Bothell campus, where many in the group are based.

Several workers who asked not to be identified say they were told pink slips would go out as early as this week and could affect up to a third of the 3,000 IT workers.

Rowe said the layoffs would be part of its strategy to cut costs, but not as immediate or as large as employees say. "That number is inaccurate and would be considerably smaller."

More layoffs, including in the IT department, could happen by year's end. The company has said it plans to cut at least 1,900 jobs, including those about to be trimmed.

The layoffs would be the latest blow to morale at what was once the heart of Craig McCaw's wireless empire. AT&T Wireless and its 30,000 employees — 5,000 in Washington — have navigated a rocky road the past year that has tested their endurance.

Among other things, problems with its technology resulted in highly public blunders. The company also faced increased attention after it was disclosed overseas outsourcing of tech jobs was being considered.

But perhaps what threatens employee security most is that AT&T Wireless is on the verge of being sold. A Friday deadline for bidders is quickly approaching, with the price tag likely to surpass $30 billion.

Those interviewed attributed many of the difficulties to management changes that shifted corporate culture to one focused more on cutting costs than advancing wireless technology. They said the shift is taking the company further away from its roots as McCaw Cellular Communications.
 
AT&T bought McCaw in 1994 for $11.5 billion but left it largely intact until spinning it off as an independent company in 2001.

"It's upsetting to see such a strong company going down," said an IT employee who has worked at the Bothell campus for 3-½ years. "We were the top of the industry."

Layoff talk not new

Employees have been expecting layoffs for months, with the company saying it was pursuing plans to improve its bottom line.

But two weeks ago, the timing of the cuts became clearer. According to employees, managers gathered 30 to 90 IT staff members at a time to inform them that they would receive notice around mid-February and would have 30 days left at the company.

"We found out ... that the 16th is going to be Black Monday around here," said one employee who works on the Bothell campus.

Rowe said he was not aware of the meetings and that the number of layoffs would not be released until the company informs those affected.

One IT group manager said the severance package would include a month's pay for every year of service, up to six years.

Even before these cuts, the company said it had laid off an undisclosed number of workers nationwide, with some asked to move to the Redmond or New Jersey campuses.

Software problems

The reduction in staff comes on the heels of operational and technological problems.

In early November, the company implemented new customer-service software, a process that was to take three or four days. It took three to four weeks instead, resulting in disruptions and service delays as the critical holiday season approached.

Then later in the month, the company was singled out as the wireless carrier that lost the most customers under a new federal law dealing with so-called local number portability. The law mandated wireless carriers allow subscribers to keep their numbers when switching to other carriers.

Software was again an issue. But this time it affected customers so severely — many waited days or weeks, rather than hours, to get their numbers switched — that the Federal Communications Commission demanded the company explain the problems and how it was solving them.

"Customer service went pretty far south in these months," Chief Executive John Zeglis acknowledged during a conference call for the company's fourth-quarter financial report.

He said the most common question posed is why the company installed the customer-service software when it did. The answer, he said, was the old system was running out of capacity and was not able to handle the volume of business expected from portability and the holiday season. It was critical to install a new system to handle the surge.

Internally, employees complain that even if the upgrade was important, it was not ready to be launched.

On the portability issue, the company said much of the difficulty resulted from software glitches at a third party hired to assist in shifting the numbers.

AT&T Wireless indicated the problems had been resolved to the point where it is on par with the industry when transferring numbers.

While the tech staff dealt with problems, the company became entangled in public discussions of overseas outsourcing.

For some time, the company has been evaluating outsourcing as a cost-cutting method. Though AT&T Wireless acknowledges it is considering such a move, it has not said if and when it would be implemented.

Some employees caught a glimpse of plans recently when they saw notes left behind on a conference room's whiteboard. One of them used a cellphone camera to take a picture of the whiteboard and pass it on to colleagues via e-mail.

In scrawled handwriting, the notes read: "What opportunity do we have to offshore/outsource? What percent, or how many headcount, would support project work? What functions don't we have covered?"

Some employees said a group of workers from India arrived at the Seattle-area offices a couple of weeks ago to learn employees' jobs. The Indian workers sit in cubicles next to AT&T Wireless employees and attend meetings with them.

The workers are part of a "buddy program" to move some functions to India, but Rowe said layoffs are not tied directly to the program.

Employees interviewed said that though their jobs may be replaced by outsourcing, they don't blame the overseas workers or harbor animosity toward them.

Instead, it is another reason why they think the company is sliding.

One employee since the McCaw days said the mantra " 'We take care of employees' has turned into 'We could really care less.' "

For some, normalcy rules

Meanwhile, for some workers unaffected by most of the changes, it's business as usual. Most of the anxiety, they say, stems from the possible sale of the company.

"I'm pleasantly surprised that people aren't running around saying the sky is falling," said Maurice James, who works in corporate marketing. After all, he said, "If you've been in telecom before, it's the norm. There's a story a week, and until someone tells you what's happening, you keep doing what you are supposed to be doing."

Rowe said employees are aware the company is in an unsettling period. But many are accustomed to change, he said, and have benefited from it.

"In an industry dynamic as wireless, there's a fundamental understanding that in order to grow and be profitable, we need to be able to adapt," he said.

Not surprisingly, much of the talk in hallways and at lunch revolves around who will buy the company and which deal would be in the best interest of employees.

The thinking goes that job security may be higher if the winning bidder is one of the two foreign companies said to be contemplating offers — NTT DoCoMo, the Japanese company that already owns 17 percent of the company, or U.K.-based Vodafone.

In that scenario, either buyer would need a North American headquarters to run the network and corporate functions, keeping a larger number of jobs intact.

Another appealing option to some is ownership by Nextel Communications, a company also with McCaw roots, but one that uses a different underlying wireless technology.

The one clear threat many employees see is the company thought to be the front-runner: Atlanta-based Cingular Wireless, which runs on the same technology platform as AT&T Wireless.

Cingular's owners, SBC Communications and BellSouth, have deep pockets and deep resources that could result in cuts in AT&T Wireless headcount.

"Telecom is an industry with a lot of change. Some people are comfortable, some are not," said a network employee who works in Redmond.

"I have been through one already. I originally started with McCaw. What I've learned is what's best is what's right for business and what's right for shareholders."

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com

Copyright © 2004 The Seattle Times Company