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Leaner Labor Costs Drive FairPoint Quarterly Earnings

Pat Wellenbach
There are 229 fewer FairPoint employees than in the same quarter last year, which along with other cuts have helped the company post a better earnings report.

FairPoint Communications issued a rosier than usual second-quarter earnings report.

While there were some bright spots in revenue, the company said much of the more favorable financial picture is due to lower labor expenses since it settled with unionized worker earlier this year.

FairPoint actually saw revenues decline from the same quarter last year.

But unlike a year ago, when it lost almost $22.7 million in the second quarter, this year it reported a net income of $40.3 million.  

That was due largely to cost savings from the new contracts with union employees, and the elimination of medical benefits for retired workers.

The company’s operating expenses decreased by a substantial $84.4 million for the quarter.

In May, FairPoint announced it is laying off approximately 260 workersin Vermont, New Hampshire and Maine.

In prepared remarks, FairPoint CEO Paul Sunu said the layoffs allow the company to align its workforce to its current business needs — something it couldn’t have done as easily without the new union contracts.

“The new provisions of the collective bargaining agreements allowed for a more streamlined layoff process with lower severance costs than in the past,” said Sunu.

Overall there are currently 229 fewer FairPoint employees compared to the same quarter last year. As of June 30, the company had 2,931 employees.

As he did earlier this year, Sunu said the company is aware of a trend toward consolidation in the telecommunications industry and is exploring a number of options — including a possible sale.

"The new provisions of the collective bargaining agreements allowed for a more streamlined layoff process with lower severance costs than in the past." - Paul Sunu, FairPoint CEO

“There are limits to what I can discuss publicly on this topic, but I can assure you that we’ve been active over the past three months exploring the spectrum of alternatives available to us,” he said.

Sunu said options other than selling the company include stock buy backs, refinancing and acquisitions.

Reacting to the latest earnings report, Mike Spillane of the International Brotherhood of Electrical Workers in Vermont faulted the company for relying on job cuts to improve its bottom line.

"That $84 million that the company has taken from us is also $84 million less in buying power that we have to spend in these states. There’s no good way to look at this at all,” Spillane said.

FairPoint says it expects to save another $7 million to $9 million in the second half of the fiscal year due to layoffs announced in May.

The company continued to see gains in its Ethernet business, which now accounts for 11 percent of its total revenue.

But FairPoint again reported a net decline in the number of broadband customers, although speed upgrades and rate increases enabled it to post a gain in broadband revenue.

And the company saw a slower decline in voice line service — a longstanding trend that has outpaced growth in its Ethernet business and wholesale services to other providers.

Steve has been with VPR since 1994, first serving as host of VPR’s public affairs program and then as a reporter, based in Central Vermont. Many VPR listeners recognize Steve for his special reports from Iran, providing a glimpse of this country that is usually hidden from the rest of the world. Prior to working with VPR, Steve served as program director for WNCS for 17 years, and also worked as news director for WCVR in Randolph. A graduate of Northern Arizona University, Steve also worked for stations in Phoenix and Tucson before moving to Vermont in 1972. Steve has been honored multiple times with national and regional Edward R. Murrow Awards for his VPR reporting, including a 2011 win for best documentary for his report, Afghanistan's Other War.
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