Amid network sabotage, Verizon warns that strike could 'pressure' Q2 results

Verizon warned that the ongoing strike of 40,000 of its wireline workers could eventually affect the company's financial performance, although the company stopped short of offering specific financial guidance along those lines.

Separately, the company also said that "criminals have damaged or destroyed critical network facilities" in 24 separate instances, troubles that have cut service to thousands of Verizon customers.

"We will find out who's behind these highly dangerous criminal acts and we will pursue criminal charges," Michael Mason, Verizon's chief security officer, said in a statement reported by Multichannel News. "These perpetrators are putting lives at risk and these dangerous acts need to stop."

Verizon said the acts included slicing fiber optic cabling at a network facility box in New Jersey; sabotaging phone services in Massachusetts; and cutting fiber optic and copper cables in New Jersey, Pennsylvania and New York.

Verizon didn't specifically blame striking workers for the incidents, but did note they coincide with the ongoing strike stretching from Massachusetts to Virginia that started at 6 a.m. on Wednesday, April 13. The striking workers are represented by the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW).

"Verizon continues to expect full-year 2016 adjusted earnings to be at a level comparable to the company's strong full-year 2015 adjusted earnings," Verizon said in its first quarter earnings release. "However, given the status of labor contract negotiations, there will be pressure on second-quarter earnings due to the timing of cost reductions."

"We recognize that some of the efficiencies and future savings we need … are dependent on the timing and outcome of our current labor negotiations," Verizon CFO Fran Shammo said during the company's quarterly earnings conference call with investors.

"First and foremost, we are absolutely confident at this point in time, based on everything we have planned and the timing of the union contract, that we can deliver on the $3.99 [yearly earnings per share] compared to last year," Shammo said, explaining that Verizon's financial guidance for 2016 is similar to what it made in 2015. He added that Verizon expects a dip in its earnings per share in the second quarter, but that the carrier expects to recover from that dip in the second half of the year.

"The timing of the union agreement: We have planned for that, and if it goes longer, we will come back in mid-year," he said. "But keep in mind that we're looking at this as a long term agreement for both providing quality jobs for our employees and returning shareholder value to our shareholders. So that's where we stand with that."

Shammo explained further that "at this point it's too early to tell the impacts. We've deployed thousands of management employees to take on the work. We obviously always during this period of time fall a little bit behind on the install work. We still see good momentum coming in from a sales perspective, so there's a little bit of a backlog there. And we'll just have to work through this."

"But really, no financial impact per say in the second quarter that I'm anticipating," Shammo said, "unless this drags on for a much longer period of time."

For more:
- see this Multichannel News article
- see this Hill article
- see this Reuters article

Special report: Verizon-CWA 2016 strike full coverage

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