Qwest Faces Possible Strike As Pact is Set to Expire

NEW YORK -(Dow Jones)- Qwest Communications International is the latest Baby Bell to face a possible strike when its current contract expires at 2:01 a.m. EDT (12:01 a.m. MDT) on Sunday.

The Denver company's work force has suffered the most out of the Bells, as the company aggressively slashed jobs over the last several years to bring itself back from the brink of insolvency. The Communications Workers of America is pushing for better job security, as well as a check in health-care costs for current and retired employees.

The CWA represents 20,000 workers in 13 states. A separate union, the Internet Brotherhood of Electrical Workers, represents another 200 employees in Montana. Qwest employs more than 35,000 workers.

The two sides have been in negotiations for the past six weeks. Both parties acknowledged progress in the talks but declined to handicap whether an agreement would be reached.

"Both sides are working hard towards an agreement," said Robert Toevs, a spokesman for Qwest. "We are hopeful that we will reach a tentative agreement by this weekend."

CWA spokesman Al Kogler said, "We're still meeting every day and we're stil making progress. Whether we'll have it done, I don't know."

Neither sides would comment on the terms or how far apart they were. On Saturday, members of the CWA voted to give union leaders the right to call a strike if the contract couldn't be reached.

Qwest is the second company to deal with contract negotiations this month. Verizon Communications on Sunday reached an agreement with the CWA and IBEW that included a shift of health-care costs and the creation of 2,500 new union positions. The agreement came a week after the contract expired - both sides had agreed to work without a contract as the bargaining continued. The deal will be put to the union membership for ratification in the coming weeks.

The CWA likely will be more amenable to talks with Qwest than Verizon because the company is in a weaker position, said Patrick Comack, an analyst at Zachary Investment Research.

"Qwest needs as much relief as possible in their situation," Comack said. The last strike occured in 1998, when the company was known as US West, and lasted two weeks. During the last negotiation in 2005, employees worked without a contract before an agreement was reached.

Verizon's agreement with the union set the path for where Qwest could go. As a result, Comack doubts a strike will happen. In the case of a strike, Qwest has a contingency plan, Toevs said. The goal is to maintain normal service. The company said on Thursday that it was ready to support the Democratic National Convention, a four-day event held in Denver that starts on Aug. 25.

Unlike its larger peers Verizon and AT&T, Qwest has no wireless business of its own to offset the slowdown in its tradtional landline business, which continues to deteriorate. It ended the second quarter with 12.2 million access lines, down 8.2% from a year ago. The company is currently pouring its capital expenditure into upgrading its network to provide a faster Internet connection.

In addition, Qwest faces pressure from shareholders to return cash in the form of stock buybacks and higher dividends. Several Wall Street analysts have upgraded the stock and pegged the company to hike its dividend, which it began paying out at the end of last year.

As a result, Qwest has had to trim expenses to offset the revenue decline. In the second quarter, the work force has fallen 6.6% from a year ago. Chief Executive Edward Mueller told analysts on Aug. 6 that he was looking to further reduce the headcount to keep margins up.

"We're not unwilling to do the hard things," he said.

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com

(END) Dow Jones Newswires

Posted to the site on 14th August 2008