AT&T in 4-year Contract with CWA

Leading telecom giant AT&T Inc. (T - Analyst Report) entered into a wireline contract negotiation deal with the Communications Workers of America (CWA) District 6. The contract will span over four years from April 7, 2013 to April 8, 2017. The current contract – shared between the two parties – will come to an end on April 6, 2013.

Per the tentative agreement, there will be a general wage increment every year – 2.25% in the first, 2.5% in the second, 2.75% in the third, and 3% in the last. The deal also covers the scope of 1% pension band hike for each year for most employees.

Additionally, there is an expansion plan for additional employees with a guaranteed job proposal that provides a definite job opportunity with AT&T. Almost 20,000 wireline employees spreading across Arkansas, Kansas, Missouri, Oklahoma and Texas come under the contract.

In the coming days, the deal will be put forward for an approval voting by the CWA members. A bonus of $1,000 will be handed over to each eligible employee if the agreement is approved on or before January 31, 2013.

Earlier in August, the CWA ratified three-year contracts for the AT&T wireline employees and the Midwest region. In December, a three-year contract for the Southeast region was also approved. On a collective basis, nearly 40,000 AT&T wireline employees are under these ratified agreements.

We maintain our long-term Neutral recommendation on AT&T – the second largest provider of wireless services in North America after Verizon Communications (VZ - Analyst Report). The company, currently, retains a Zacks #3 Rank, implying a short-term Hold rating on the stock.

We believe that AT&T’s growth prospects are strong driven by subscriber accretion, higher smartphones adoption, Long-term Evolution mobile broadband network, iPhone sales and U-verse expansion. However, persistent access line losses, competitive pressures and heavy iPhone subsidies might drag near-term margins and earnings.