AT&T Inc. (NYSE:T) quietly gave pink slips to more than 700 DirecTV home installers last week. The AT&T subsidiary might be the largest pay-TV operator in the U.S., but that doesn’t mean it isn’t prone to job cuts, especially in the face of increased cord cutting.
Massive layoffs at the satellite television company came as a surprise. In late November, Randall Stephenson, CEO of AT&T, promised to create jobs if President Trump’s tax reform was passed. That job creation may still come to pass, but until then, it appears as though job cuts are on the table. The big question for DirecTV employees is, will the layoffs be limited to 2017 or will the cable giant also face layoffs in 2018?
AT&T on Job Cut Spree Before Tax Reform Passes
AT&T continued its job-cutting spree in the days before the House approves Trump’s massive tax reform bill. The telecom juggernaut laid off more than 700 home installers at DirecTV.
The layoffs came less than one month after Stephenson said AT&T would create 7,000 jobs if the tax reform is passed.
When asked about the massive layoffs at DirecTV, a spokesperson at AT&T took a page out of the corporate layoff handbook, “We continue to align our workforce with the changing needs of the business. This includes some premises technician jobs.”
This isn’t the first time AT&T has spread the holiday cheer in December. In mid-December, AT&T announced plans to eliminate 87 positions at its Credit & Collections Center in Kansas City, Missouri.
The company said the “restructuring” will be permanent. The layoffs will begin in February 2018 and be completed by March 14.
The AT&T layoffs planned for 2018 comes on the heels of hundreds of other job cuts at announced at AT&T this year. A large number of layoffs in 2017 occurred at call centers, with the company saying it was looking to reduce costs.
On November 17, AT&T shuttered its call center in East El Paso, Texas; a move that affected around 280 employees. Those affected employees were told they could either be laid off, be relocated to another facility in El Paso, or relocate to Missouri or Florida.
In May, AT&T announced plans to close its DSL Care Center in downtown Detroit, laying off 53 in the process. And in March, AT&T said it was laying off up to 54 employees at its Richardson, Texas call center.
With the tax reform bill poised to pass, telecom companies like AT&T and Verizon Communications Inc. (NYSE:VZ) are expected to be big winners. That’s because the bill will lower the corporate tax break rate from 35% to just 21%; far lower than what Americans pay in taxes. The bill also includes a provision allowing companies to deduct capital expenses for the next five years.
What could this look like for AT&T’s bottom line? By using the deduction provision, AT&T’s free cash flow could increase by around $1.6 billion. In 2018 and 2019, this could help AT&T earnings per share increase 16%.
DirecTV to Increase Rates in 2018 After Losing 251,000 Customers in 3rd Quarter
The tax benefits coming to AT&T may benefit shareholders but it won’t trickle down to subscribers. In fact, DirecTV, along with Cox Communications, Comcast, and Dish, is expected to raise costs in 2018.
The increase comes as more and more subscribers are cutting the cord, lured by streaming services like “Sling,” “Hulu Live TV,” and “YouTube TV.” Cable companies need to make up that lost revenue, and current and new subscribers are subsidizing cord cutters.
In the third quarter of 2017, AT&T’s DirecTV business lost 251,000 subscribers. Its “U-verse TV” base lost an additional 134,000 viewers. At the same time, AT&T added 296,000 subscribers to its streaming DirecTV Now package.
Still, prices are going up. Subscribers to DirecTV were hit with this statement from AT&T, “Due to higher costs of programming, the monthly rate for the below services will increase on January 21, 2018, and the changes will appear in billing statements starting on that date.”
Happy New Year.
“AT&T lays off DirecTV workers despite pledge to create jobs,” New York Post, December 18, 2017.
“WARN Notice,” AT&T Inc., December 14, 2017.
“Verizon, AT&T tipped to gain most from tax reform,” Mobile World Live, December 15, 2017.
“AT&T Reports Third-Quarter Results,” AT&T, Inc., October 24, 2017.