Qwest tradeoff: Pay vs. benefits
Ken Alltucker
The Arizona Republic
Thursday, August 18, 2005

For 3,000 Qwest workers in the Valley and northern Arizona, the company's new labor pact will bring fatter paychecks but also costlier health benefits.

Two main provisions of a labor deal announced late Wednesday by Denver-based Qwest and a union representing nearly 25,000 workers nationwide will give employees their first wage increase in three years but also will make employees with families pay more of their own health care costs.

The tentative deal, which still must be approved by union members, followed weeks of strike talk from the Communications Workers of America and moves to slash the debt-laded telephone company's rising health care costs.

"Overall, the package is probably a plus, moneywise," said Linda Glass, president of CWA 7019, which represents 3,000 Qwest employees from the Valley through northern Arizona.  "Our wages will more than offset the additional costs of health care."

Another carrot tossed the union's way was the company's decision to back away from a policy that would have required that workers be available for 16 hours of mandatory overtime each week.  The new deal keeps the company's existing policy of eight hours of mandatory overtime, a concession the union won in 1998 following a two-week strike.

Workers will maintain existing levels of health care coverage and will pay more for family coverage.  Employees will pay an enrollment fee of $300 each year for a spouse or other family member.  Each additional dependent will cost employees $400 per year.

The deal is a mixed bag for retirees, too.  It doesn't impact employees who retired before 1990, but other retirees will see some cuts to life insurance benefits.  The actual amount depends on the employees' salary at retirement.

The labor pact didn't address another issue that the union said was important: limiting offshoring of call center jobs.  Qwest has aggressively eliminated those domestic jobs by sending work overseas.

CWA spokeswoman Candice Johnson said that although the labor pact does not take on the topic of sending jobs overseas, the union will discuss the issue with Qwest management as needed.

Qwest officials declined to comment about the deal beyond a written statement that indicated the Baby Bell was "pleased" to find "solutions to the issues facing our industry."

Spokesman Bob Toevs in Denver, where Qwest is based, deferred all questions about contract details to the Communications Workers of America.

Saddled with $17 billion in debt and facing aggressive moves from nimble cable and wireless competitors, Qwest desperately wanted to avoid a work stoppage.

The union agreed to a two-year wage freeze in 2003 to help the local-telephone company narrowly avert a bankruptcy filing.

The new contract gives employees raises of 3.0 percent in the first year, 2.5 percent in the second and 2.0 percent in the third year.

Some Wall Street analysts questioned whether Qwest gave away too much in contract negotiations.

Standard & Poor's Equity Research on Wednesday reiterated its sell rating on the stock, citing the potential impact of wages on the company's cash flow.  The research firm noted Qwest's low rates snaring high-speed Internet and long-distance customers.

But investors seemed to calmly absorb news of the contract, announced after the close of trading Tuesday.  Shares of Qwest closed Wednesday at $3.99, up 14 cents.

Qwest is attempting to beef up its rate of high-speed Internet connections in Arizona by slashing rates and packaging Internet with other services, such as telephone and television.

Although the company would not provide the number of subscribers in Arizona, Qwest said it now has 2.4 million access lines in the state.  That is down from 3.3 million in 2000.

Throughout its 14-state territory, Qwest counts 4.6 million long-distance lines and 1.2 million high-speed Internet connections.