Alltel to Lay Off 1,000

(Telephony) Regional carrier Alltel trimmed its earnings outlook for 2001 and announced 1000 layoffs, citing increased competition from larger nationwide wireless operators.

Alltel will cut 1000 employees from its payrolls--about 3.7% of its workforce--through early retirements and job reductions. Employees will have until Feb. 28 to opt for early retirement.

The carrier also will reorganize regional and corporate operations, reducing its operating regions from five to three. Regional headquarters in Cleveland, Charlotte, N.C, and Little Rock, Ark., will be maintained, while the Tampa, Fla. and Phoenix offices will no longer operate as regional headquarters.

“We must continue to simplify and streamline Alltel’s entire organization to maintain customer and earnings growth,” said Scott Ford, president and chief operating officer of Alltel.

Alltel said it now expects earnings from continuing operations to be in the range of $2.85 to $3.00 per share. The consensus of analysts surveyed by First Call/Thomson Financial was for the carrier to earn $2.98 per share in 2001.

Dan Reingold, analyst at Credit Suisse First Boston, downgraded Alltel to “hold” from “buy” and lowered his forecast on Alltel’s wireless revenue growth to 8.5% from 13%. Operating income growth was changed from a positive 13% to a negative 3%.

“Our downgrade and earnings reductions are the result of deteriorating fundamentals in the wireless business,” Reingold said in a research note. “We believe that, as competition heats up from the many nationwide wireless carriers, Alltel will face increasing difficulties meeting its financial targets.”

Alltel’s wireless subscriber growth will accelerate this year, the company said, with between 2.4 million and 2.5 million customers being added. The net gain after accounting for a churn rate of about 2.5% will be 500,000 to 550,000 customers.

In the fourth quarter of 2000, Alltel’s net customer gains, excluding those added through acquisitions, totaled 142,475--20% below the company’s plan and 12% less than the 160,767 adds in 1999’s fourth quarter. According to executives, softer gross sales resulted from the company’s decision not to match the free digital-phone promotions offered by its principal competitors.

For the fourth quarter of 2000, Alltel reported net income of $195.3 million, or 62¢ per diluted share, excluding merger expenses and other special charges, down from $206.3 million, or 65¢ per share, a year ago.