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Top Telecoms Shed 910 Workers as Slump Continues
By ANDREW SIMONS
It’s been another tough year for the telecommunications industry.
The sector’s doldrums certainly touched Orange County, where the top 20 telecom companies shed 910 jobs in the past year, according to this week’s Business Journal list, which ranks landline, wireless and gear makers by county employment.
The job losses mark a 6% decline to 13,822 workers versus a year ago. Last year’s list showed a loss of 1,293 jobs, or 8% of OC telecom workers.
This year, the Business Journal made estimates for two companies,No. 5 Sprint Corp. and No. 8 MCI,while two others didn’t report last year’s employment numbers. Without those four companies, the remaining 16 posted a 7% decline in employment.
The top telecom providers have several units operating here. The biggest six maintained their year-ago rankings.
San Antonio, Texas-based SBC Communications Inc. nabbed the overall No. 1 spot, despite an 11% decline in employment to 5,792. No. 2 New York-based Verizon Communications Inc. reported a 2% overall gain in OC employment to 3,502. Rounding out the top three was Bedminster, N.J.-based AT & T; Corp., which shed 6% of its local workers to 1,085.
Hard times are a consistent thread for the telecom industry. In the past few years, the industry has been hit with the double whammy of oversupply of capacity and a weak economy.
OC’s telecom industry has been in flux since 2000, and the Business Journal’s lists have reflected the changes.
In 2000, data center providers such as Exodus Communications Inc. were prominent. But many fell off the list as they drastically scaled back operations or went out of business as aggressive demand forecasts weren’t met.
In 2001, it was competitive local exchange carriers,smaller telephone service providers spawned by deregulation,that thrived and perished amid heavy debt and competition from big names such as SBC. And last year it was wireless service providers such as Sprint PCS, a unit of Overland Park, Kan.-based Sprint, and AT & T; Wireless, a unit of No. 3 Bedminster, N.J.-based AT & T; Corp., that saw declining employment numbers.
The result: This year’s list is a mishmash of telecom companies.
Analysts differ on where the industry is headed.
In May, Newport Beach-based Roth Capital Partners LLC analyst David Kang predicted there was a rebound under way. He noted that the cash flow at the top five national phone carriers doubled in the first quarter while their debt load shrunk by a third.
And after two years of virtually no equipment investment, he predicted spending by the big telecoms would grow steadily this year.
“One of the carriers we interviewed said the technology and economics are there to be deployed on a massive scale,” Kang wrote in a research note. “We believe the fiber deployment will be a multiyear effort, as the carriers will initially roll out in small regions late this year or early next year and perhaps take five to seven years for the completion.” Fiber optic communications systems are ultra-fast compared to current landline connections but come at a steep price.
Other telecom watchers say a rebound is less likely in the near term.
El Segundo market researcher iSuppli Corp. said network spending by telecom companies could fall another 11% this year and next.
That’s adding insult to injury after last year’s 27% decline and 2001’s 24% dip. ISuppli said more spending cuts are expected because technology companies are focusing on developing products that work with existing networks instead of making gear that requires upgrading. That appeals to telecom executives concerned about profits.
The following is a breakdown by sector of how OC’s telecom companies fared in the past year:
Incumbent Service Providers
The big local and long distance phone service carriers cut workers for the most part in the past year.
SBC, which tops OC telecom providers, cut 14%,or 815,of its local workforce to 5,185 employees.
The telecom provider has been under pressure from AT & T;, which started offering local residential phone service to OC and other California residents in the past year. Until recently, local service largely was controlled by SBC, with AT & T; only providing local calls for businesses.
The move marks the return of AT & T; to local home service here after the company’s landmark 1984 breakup that created Pacific Bell,now SBC,and other regional offshoots.
Even so, AT & T; reduced its OC employment by 11% to 85 workers. Most of AT & T;’s OC presence is in its wireless unit.
Verizon Communications also trimmed employment, reporting a 9% decline to 1,202 workers. Verizon has long offered local service in the county’s coastal regions.
No. 4 Atlanta-based Cox Communications Inc. reported no change in its OC workforce of 850. Cox has been aggressively pushing local phone service on top of its cable and high-speed Internet offerings.
Landline Competitors
Competitive exchange carriers, spawned by telecom deregulation to challenge incumbent phone companies, had a rough time in the past year.
No. 8 Ashburn, Va.-based MCI didn’t return queries about its OC employment, though sources said MCI, the No. 2 long distance provider in the U.S. behind AT & T;, saw declines.
The Business Journal estimated MCI has 200 workers in the county, versus 225 a year ago. The company is mired in an investigation into its accounting methods.
No. 10 Reston, Va.-based XO Communications Inc. cut its OC employment by 17% to 150 amid further cost reductions. And No. 18 Denver-based Qwest Corp., which has undergone massive layoffs in the U.S., cut OC workers by 29% to 65.
While competitive exchange carriers lured venture funding in the 1990s, many since have gone out of business. What’s left is a handful of big names facing off with each other for the fruits of deregulation.
A newcomer that didn’t make the list but bears watching is Los Angeles-based TelePacific Communications Corp., which just opened an Irvine data center and network switching station.
TelePacific signed a 10-year lease for 30,000 square feet at 72 Corporate Park near Barranca Parkway and the former Tustin Marine base. The Irvine facility is set to serve TelePacific’s 1,100 OC customers, who now are handled out of a switching center in Los Angeles.
The property used to belong to Exodus before it filed for bankruptcy protection in 2001. Exodus, now part of Britain’s Cable & Wireless PLC, still had several years remaining on its lease.
Wireless Providers
Wireless companies showed signs of stabilization this year, with just two of the top five providers on this week’s list posting job losses.
AT & T; Wireless and Sprint PCS together cut 159 OC workers from their payrolls.
But those declines were offset by Cingular Wireless, a unit of SBC Communications, and Verizon Wireless, a unit of No. 2 Verizon Communications Inc., which together added 238 jobs this year.
The estimate for Sprint PCS is based on company input and conversations with sources.
In the past year, Sprint PCS trimmed its office space across OC, including at its Irvine facility. The company had occupied more than 100,000 square feet in a tower on Von Karman and once employed 1,100 people at its call center there.
But Sprint, as with other wireless carriers, has slashed thousands of jobs nationwide, with many of the cuts coming from call centers such as the one in Irvine. Sprint cut its office space in the building by half and trimmed workers, too,an effort that took a year and concluded in January.
The other major wireless service provider, Nextel Communications Inc. of Reston, Va., maintained the No. 6 spot with 443 workers, unchanged from last year.
Others
The Business Journal’s telecom list includes a variety of other companies that provide everything from telephone network services for offices to voice and data messaging services.
No. 7 Houston-based NextiraOne LLC grew its local workforce 6% to 212. NextiraOne provides data and voice networks for carriers and telecom services and consulting for businesses.
No. 13 Denver-based Expanets Inc. kept its OC employment flat at 100 workers. Expanets, which builds phone systems for corporate customers, employs 100 people in a Tustin office. Its clients include Irvine-based Linksys Group, now part of Cisco Systems Inc.
A big percentage decliner was No. 17 Alcoa Wireless Network Services in Irvine, which reported a 50% decline in headcount to 75. Pittsburgh’s Alcoa Inc. bought the telecom engineering and management company, formerly Mericom Inc., in January.
Dropping off the list was last year’s No. 20 Integrated Technology in Orange, which didn’t qualify with 24 OC workers.
Newcomers included No. 15 Rochester, N.Y.-based Mpower Holding Corp., whose Anaheim unit has 80 workers, and No. 20 Costa Mesa-based Blue Violet Networks with 48 workers. Blue Violet installs phone systems and software for business and government customers.
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