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Major AT&T Wireless layoffs on hold

By Tricia Duryee and Drew DeSilver
Seattle Times business reporters

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But with the two companies consolidating into one, the move possibly only delays the fate of many employees.

In two documents filed with the Securities & Exchange Commission yesterday, the Redmond-based wireless carrier disclosed new information regarding layoffs, executive compensation and details of the Northwest's record-breaking $41 billion acquisition.

A company spokesperson said after the documents were available that some of the information — based on events and developments of last year — was already out of date because of the merger agreement with Cingular.

In one document, the company's annual statement, AT&T Wireless updated its long-term cost-reduction efforts, coined "Project Pinnacle," saying the company expected to have to cut 3,900 jobs under the plan by the end of 2004, up from an expected 1,900. That would mean 2,700 layoffs this year after 1,200 jobs were eliminated in 2003.

The company initiated the plan last year, but the pending merger has prompted a second look.

"We are currently re-evaluating all long-term business plans in light of merger agreement with Cingular, particularly plans for Project Pinnacle and involved job reductions," said David Caouette, a company spokesman.

He said that further implementation of Project Pinnacle "has been largely suspended" and that there was a good chance that "this level of reductions will simply not happen."

That will not save workers who received notice last month that their jobs were being cut, he said. A total of 220 information-technology workers, 150 of whom are in Bothell facilities, will still be laid off at the end of this month.

AT&T Wireless, the third largest U.S. carrier, has 31,000 employees — 5,700 in Washington, primarily in Redmond and Bothell. It is widely expected that Cingular will cut staff.

The second document released yesterday, the company's proxy statement, gave new details on the Feb. 17 acquisition's background. Although the media reported many events at the time, little information came officially from the company.

The company said it started merger discussions with Cingular's parents, SBC Communications and BellSouth, as early as March 2002 — almost two years before it was actually put up for bid in January. At one point, four companies were interested in acquiring AT&T Wireless.

Two were Cingular and NTT DoCoMo, which owns 16 percent of the company. The other parties — not identified in the AT&T Wireless document — were believed to be Nextel Communications and Vodafone Group.

Negotiations intensified shorted before 3 a.m. Eastern time Feb. 17. Cingular and another party had both submitted bids — at $14 a share. AT&T Wireless was leaning toward the unidentified bidder, reported previously as Vodafone.

"The other party's proposal appeared slightly superior to Cingular's in terms of timing and risk," the proxy statement said.

That is, until Cingular offered $15 a share with the condition that the AT&T Wireless board sign it immediately.

"Cingular, SBC and BellSouth arrived at the offices of our legal advisers with the merger agreement fully executed. ... John D. Zeglis, our chairman and chief executive officer, then executed the merger agreement on our behalf," the proxy said.

The deal was announced two hours later, at 5 a.m. Feb 17.

The proxy also detailed 2003 compensation for AT&T Wireless' top executives and how they stand to gain from the deal.

For instance, Zeglis was granted options for 750,000 AT&T Wireless shares. Normally those options would vest over 3-1/2 years, but under the deal with Cingular they will all vest just before the deal closes. Since the exercise price on each option is $6.84, Zeglis will make a profit of $8.16 on each one, for $6.12 million.

Under the company's new severance plan for senior executives — adopted the week before it struck the deal with Cingular — those execs could pocket a combined total of up to $30.2 million after the merger.

Until then, however, they are eligible for cash "retention bonuses" of up to 125 percent of their base salaries — part of a $50 million fund set aside to persuade "key employees" to stick around until Cingular takes over.

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com; Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com

Dialing for dollars
The top executives of AT&T Wireless earned handsome paychecks last year, but the company's pending acquisition by Cingular could make them even richer. All outstanding options and restricted stock will fully vest just before the merger, making them subject to Cingular's $15-a-share buyout; in addition, the executives are eligible for severance payments.
Executive	2003 cash compensation	Estimated payout upon merger from accelerated options and stock	Estimated severance payment
John Zeglis, chairman and CEO	$3,354,681	$14,288,764	$7,447,694
Michael Keith, president of mobility operations	6,031,463	5,610,466	1,884,886
Andre Dahan, president of mobile multimedia services	1,891,870	5,610,466	4,005,024
Joseph McCabe Jr., chief financial officer	1,395,725	3,420,677	3,122,278
Lewis Chakrin, executive vice president for corporate strategy and business development	1,175,024	3,420,677	2,974,741
Source: Company filings

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