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CWA Wins Stability in Sprint Nextel Merger
Both the Federal Communications Commission and the Justice Department on Aug. 3 approved the merger of Sprint and Nextel Communications, creating the nation's third largest wireless provider, with 35 million subscribers, behind only industry leader Cingular and Verizon Wireless.
But the FCC approved the deal only after, at CWA's behest, it gained a commitment that Sprint Nextel would make an equitable distribution of debt and assets for the local telephone services that Sprint will spin off as a condition of the merger.
Sprint Nextel will retain its non-union wireless and long distance telephone operations, while divesting itself of its unionized local landline telephone service. The new company - which will inherit CWA's and the IBEW's contracts on behalf of 6,000 represented employees - is expected to launch under a new brand name within six to nine months. Serving mostly rural customers, with 7.5 million switched access lines, it will become the fifth largest landline telephone company in the United States.
The merger is a wildcard in an already contentious round of bargaining with Sprint on behalf of its unionized workers, said CWA Telecommunications Vice President Jimmy Gurganus.
CWA Local 3871, representing 300 Sprint workers in Tennessee, entered into bargaining with the company on Aug. 2, with a disappointing exchange of proposals. CWA Representative Thelma Dunlap, who heads the bargaining committee along with Local 3871 President Eddie Hicks, was disappointed with the company's demands to basically eliminate vacation and substitute paid-time-off to include sick time and floating holidays, and to scrap seniority bidding rights for new positions.
"This is un-American," she said. "When you look at the history of working people in this country, people have shed blood for these gains, and they're trying to tell us we have to take a look at the needs of the company."
In June, Local 3871 voted overwhelmingly to strike if necessary, as it faces a contract expiration of Aug. 31. It is the third local to do so, behind Local 3672 in North Carolina and Local 3176 in Florida. Local 3672's contract for 98 workers in Hickory, N.C., expired May 31. The Florida contract, for 476, expired March 1.
"Local leadership is aware that six months to a year down the road, they will all be working for a new company," Gurganus said. "They want to provide the best possible service for that company's customer base and secure their own futures with a viable corporate entity."
Hicks said, "We all know what Sprint's end game is. They bargain a cheap contract, reap the short-term savings, and then sell us down the river with a company that can't compete. We're not having it."
CWA initially filed its concerns with the FCC shortly after Sprint's announcement on Dec. 15, 2004 of the proposed merger of the two companies with a combined worth, by CWA's estimates, of $70 billion. The union pointed out that from 1998 to 2003, Sprint reduced its overall long-term debt by shifting an estimated $2.7 billion in revenues from its local telephone operations to strengthen wireless and long distance. Meanwhile, the company failed to invest in upgrading its local telephone infrastructure, leaving service quality to deteriorate and technicians unable to keep up with repairs.
Maintaining that when the spin-off takes place, local rate payers deserve a dividend for this subsidy, CWA locals, most notably Local 3681 in New Bern, N.C., lobbied public officials in their own states and, in early July, Gurganus and CWA Research Economist Debbie Goldman explained the union's position to FCC Commissioner John Adelstein, who further pressed Sprint for reassurance prior to the approval.
Local 3681 President Ron Knight's efforts provoked an inquiry by North Carolina Attorney General Roy Cooper, requiring the company to prove how Sprint Nextel will ensure that the new company will have the financial stability to provide quality local telephone service to North Carolina customers. Cooper also raised concerns about the new company's ability to bring DSL and other new technologies to rural customers, and how to ensure that Sprint Nextel's contractual arrangements with the new company will be competitive with rates the new company might receive from other providers.
But the big payoff came in Sprint's and Nextel's response to the FCC - one day prior to its approval of the merger. Sprint Chairman and CEO Gary Forsee and Nextel President and CEO Timothy Donahue together wrote to the FCC that the new company "will receive an equitable debt and asset allocation at the time of its proposed spin-off so that the company will be a financially secure, Fortune 500 company. Its stock is expected to be traded on the New York Stock Exchange and it anticipates having a level of equity, debt and other financial characteristics consistent with those of companies that have been rated 'investment grade' by major ratings agencies."
Said Gurganus, "We're very appreciative of the commissioners' support in obtaining this commitment from Sprint and Nextel, and you had better believe we're going to hold them to it."
But the FCC approved the deal only after, at CWA's behest, it gained a commitment that Sprint Nextel would make an equitable distribution of debt and assets for the local telephone services that Sprint will spin off as a condition of the merger.
Sprint Nextel will retain its non-union wireless and long distance telephone operations, while divesting itself of its unionized local landline telephone service. The new company - which will inherit CWA's and the IBEW's contracts on behalf of 6,000 represented employees - is expected to launch under a new brand name within six to nine months. Serving mostly rural customers, with 7.5 million switched access lines, it will become the fifth largest landline telephone company in the United States.
The merger is a wildcard in an already contentious round of bargaining with Sprint on behalf of its unionized workers, said CWA Telecommunications Vice President Jimmy Gurganus.
CWA Local 3871, representing 300 Sprint workers in Tennessee, entered into bargaining with the company on Aug. 2, with a disappointing exchange of proposals. CWA Representative Thelma Dunlap, who heads the bargaining committee along with Local 3871 President Eddie Hicks, was disappointed with the company's demands to basically eliminate vacation and substitute paid-time-off to include sick time and floating holidays, and to scrap seniority bidding rights for new positions.
"This is un-American," she said. "When you look at the history of working people in this country, people have shed blood for these gains, and they're trying to tell us we have to take a look at the needs of the company."
In June, Local 3871 voted overwhelmingly to strike if necessary, as it faces a contract expiration of Aug. 31. It is the third local to do so, behind Local 3672 in North Carolina and Local 3176 in Florida. Local 3672's contract for 98 workers in Hickory, N.C., expired May 31. The Florida contract, for 476, expired March 1.
"Local leadership is aware that six months to a year down the road, they will all be working for a new company," Gurganus said. "They want to provide the best possible service for that company's customer base and secure their own futures with a viable corporate entity."
Hicks said, "We all know what Sprint's end game is. They bargain a cheap contract, reap the short-term savings, and then sell us down the river with a company that can't compete. We're not having it."
CWA initially filed its concerns with the FCC shortly after Sprint's announcement on Dec. 15, 2004 of the proposed merger of the two companies with a combined worth, by CWA's estimates, of $70 billion. The union pointed out that from 1998 to 2003, Sprint reduced its overall long-term debt by shifting an estimated $2.7 billion in revenues from its local telephone operations to strengthen wireless and long distance. Meanwhile, the company failed to invest in upgrading its local telephone infrastructure, leaving service quality to deteriorate and technicians unable to keep up with repairs.
Maintaining that when the spin-off takes place, local rate payers deserve a dividend for this subsidy, CWA locals, most notably Local 3681 in New Bern, N.C., lobbied public officials in their own states and, in early July, Gurganus and CWA Research Economist Debbie Goldman explained the union's position to FCC Commissioner John Adelstein, who further pressed Sprint for reassurance prior to the approval.
Local 3681 President Ron Knight's efforts provoked an inquiry by North Carolina Attorney General Roy Cooper, requiring the company to prove how Sprint Nextel will ensure that the new company will have the financial stability to provide quality local telephone service to North Carolina customers. Cooper also raised concerns about the new company's ability to bring DSL and other new technologies to rural customers, and how to ensure that Sprint Nextel's contractual arrangements with the new company will be competitive with rates the new company might receive from other providers.
But the big payoff came in Sprint's and Nextel's response to the FCC - one day prior to its approval of the merger. Sprint Chairman and CEO Gary Forsee and Nextel President and CEO Timothy Donahue together wrote to the FCC that the new company "will receive an equitable debt and asset allocation at the time of its proposed spin-off so that the company will be a financially secure, Fortune 500 company. Its stock is expected to be traded on the New York Stock Exchange and it anticipates having a level of equity, debt and other financial characteristics consistent with those of companies that have been rated 'investment grade' by major ratings agencies."
Said Gurganus, "We're very appreciative of the commissioners' support in obtaining this commitment from Sprint and Nextel, and you had better believe we're going to hold them to it."