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Union Strike Adds To An Already Negative Quarter For Verizon

REUTERS/Brendan McDermid

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Robert Donachie Capitol Hill and Health Care Reporter
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Verizon Communications Inc. indicated Tuesday that an ongoing labor strike negatively affected its bottom line in the most recent quarter.

Verizon CEO Lowell C. McAdam hinted in May that the labor strike involving some 40,000 employees may negatively “impact its second-quarter results.” And indeed it did.

The company reported Tuesday that revenues fell “more than expected” and it’s experiencing continued “weakness in the wireless division.”

To end the nearly seven-week standoff, the company offered it’s disgruntled employees a “nearly 11% raise, a small bump in pension benefits and a promise to add 1,400 new union jobs.” It also addressed two key problems at the heart of the strike for the laborers — subcontracting and relocating employees — and promised to scale back on both.

Verizon reported a 46 percent drop in user subscriptions from last year and a .04 percent increase in subscriber cancellations at the end of the most recent fiscal quarter. Revenue fell 5.3 percent, while profits fell from $4.23 billion last year to $702 million, reports the Wall Street Journal.

The financial report came just one day after Verizon announced the $4.83 billion purchase of Yahoo Inc. Experts say that the purchase represents a bet that Yahoo will give the largest media carrier an advantage in broadening it’s audience.

In the face of rising competition in the tech marketplace, Verizon warned investors that “earnings may plateau in 2016” as it works through new marketing strategies and completes the merger with Yahoo.

This warning is in line with recent market activity where Verizon’s shares have “slipped 0.2%,” reports the Wall Street Journal.

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