In yet another blow to the fragile U.S. employment market, FairPoint Communications, Inc. on Thursday revealed plans to cut 400 jobs over the next several months.
The Charlotte, N.C.-based company, which operates in 18 states but is primarily focused in northern New England, is preparing to let go 100 management employees and 300 union positions, comprising roughly 10 percent of its workforce. FairPoint said it planned to make severance or incentive payments possibly totaling upwards of $13 million to eligible employees.
“We are making this decision after careful evaluation to ensure that FairPoint is staffed appropriately to serve our customers well, while prudently managing expenses," FairPoint CEO Paul Sunu said in a statement.
FairPoint, which emerged from Chapter 11 bankruptcy early this year, expects the workforce reduction to yield annual operating expense savings of roughly $34 million, with the full benefit realized next year. Moody’s Investors Service, the credit rating agency, said the reduction in jobs “is positive for Fairpoint’s credit profile as the cost savings are more aggressive than Moody’s prior estimates and will meaningfully improve the company’s free cash flow."
FairPoint made the announcement about a month after reporting its second-quarter earnings, posting a net loss of $27.1 million on revenues of $262.6 million.
Faced with escalating competition and alternatives to traditional phone service like wireless, FairPoint has been suffering significant losses in its access line business. Over the last two quarters, the company has lost 45,600 voice lines. But FairPoint reported slowing its voice access line loss to 9.3 percent on an annual basis, down from 11.6 percent in the second quarter of 2010.
In recent years, FairPoint has lost significant market share as the result of bankruptcy and certain back-office challenges, according to a 10-Q filing with the Securities and Exchange Commission. In March 2008, the company acquired Verizon Communications’ landline operators in northern New England, making FairPoint the eighth largest phone provider in the U.S. But the company faced problems transitioning Verizon’s order flow and billing systems.
FairPoint provides broadband, Internet, phone and TV services in 18 states and supports the equivalent of 1.4 million access lines. A FairPoint spokesperson told us early this year that about 85 percent of the company’s business is in northern New England.
