IBEW and CWA Concerns for Employees of the new Sprint/Nextel merger adressed by FCC

FCC Addresses IBEW and CWA Concerns in Sprint-Nextel Merger
NOTE: The IBEW and the CWA are motivated to protect the pensions for those unionized employees who will be affected by this merger. If the new entities are spun off without proper assets, the pensions could be jeapardized. MW

August 2005
The Federal Communications Commission and the Justice Department approved the merger of Sprint and Nextel Communications on Aug. 3, creating the nation's third largest wireless provider, with 35 million subscribers. Only industry leader Cingular and Verizon Wireless are larger.

The FCC's approval came only after gaining a commitment—sought by CWA—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 operations, while divesting itself of its unionized local landline telephone service.
The new company—which will inherit CWA and IBEW contracts for 6,000 represented employees—is expected to launch under a new name within nine months. Serving mostly rural customers, with 7.5 million switched access lines, it will become the country's fifth largest landline company.

The merger is a wildcard in an already contentious round of bargaining with Sprint, said CWA Telecommunications Vice President Jimmy Gurganus.

CWA Local 3871, representing 300 Sprint workers in Tennessee, began bargaining Aug. 2. Among its demands, the company wants to eliminate vacation and substitute paid time off to include sick time and floating holidays, and wants to scrap seniority bidding rights for new positions.

"This is un-American," said CWA Representative Thelma Dunlap, who heads the bargaining team. "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."

The local voted overwhelmingly in June to strike if necessary, the third local to do so. The others are Local 3672 in North Carolina and Local 3176 in Florida, whose Sprint contracts have already expired. Local 3871's contract expires Aug. 31.

"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."

Local 3871 President Eddie 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 first filed its concerns with the FCC shortly after Sprint announced the estimated $70 billion merger in December 2004.

CWA 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 service to strengthen wireless and long distance. The company's failure to invest in upgrades led local service to deteriorate and technicians unable to keep up with repairs.

As a result, CWA says local rate payers deserve a dividend when the spin-off takes place. Toward that end, CWA locals, in particular Local 3681 in New Bern, N.C., lobbied public officials in their own states.

In 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 has the financial stability to provide quality local telephone service.

Cooper also raised concerns about the new company's ability to bring DSL and other new technologies to rural customers, among other issues.

The big payoff came in the companies' response to the FCC—one day prior to approval of the merger. Sprint CEO Gary Forsee and Nextel 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."

Gurganus said CWA is "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."