UPDATE 3-Verizon strike tensions heighten on Day 2

Mon Aug 8, 2011 9:26pm EDT

* 45,000 employees on strike

* Sides apart on healthcare, pensions, work rules

* Verizon complains of sabotage, unions complain of injury

* Shares close off 5.5 pct vs 6.6 pct for S&P500 index (Adds union comment)

By Sinead Carew and Roy Strom

NEW YORK, Aug 8 (Reuters) - The second day of a strike by Verizon workers turned ugly after union representatives accused managers of injuring three workers while driving past picket lines, and the phone giant complained of a spike in network sabotage cases.

About 45,000 workers in Verizon Communications' (VZ.N) U.S. Northeast wireline unit, which provides traditional phone as well as high-speed Internet and FiOS television services, called a strike on Sunday after talks for a new labor contract failed.

The talks resumed on Monday. But the situation outside the negotiation room took a hostile turn.

Verizon complained of network sabotage cases in the same statement where it said some picketing workers were unlawfully blocking Verizon managers' access to work centers.

A spokeswoman for the Communications Workers of America, representing 35,000 of the strikers, said the union "does not condone illegal action of any kind." The International Brotherhood of Electrical Workers, representing 10,000 strikers, also said members "are expected to obey the law."

However, the CWA said some picketing workers were hurt by Verizon managers' cars and that one worker was knocked unconscious when he was clipped by the mirror of a manager's car that was speeding past a picket line.

Verizon said it was working with the police to investigate what happened, but noted that it believed the allegations are "totally inaccurate."

The CWA also cited a case in which a security guard hired by Verizon had punched a worker and knocked him to the ground on Monday morning. Verizon did not have an immediate comment on this accusation.

Meanwhile, the company said it was working with authorities to investigate at least 12 cases of sabotage, including deliberate cutting of fiber optic lines in 10 places and a case of stolen equipment that caused an outage.

Verizon said it did not know who was responsible for the sabotage, but noted an unusually high number of incidents since Saturday, the last day of the contract. The CWA said it would not condone network sabotage.

Meanwhile, Verizon said customers were seeing minimal impact as managers drafted in to cover for the striking workers were able to handle 75 percent of repair jobs on Sunday.

Verizon is looking to keep costs in check at the wireline business, which has been declining for a decade as customers have disconnected their home phones in favor of cellphone and Internet services.

The CWA and IBEW have rejected Verizon's proposals to cut pensions, change work rules and make employees pay more for healthcare.

Verizon closed 5.5 percent lower at $33.12 on the New York Stock Exchange, but still fared better than the broader market. The Standard & Poor's 500 index ended down 6.66 percent after a U.S. debt downgrade spooked investors.

Verizon has been in contract talks with both unions since late June but the unions called a strike on Sunday night after they were unable to reach an agreement by the time the existing labor contract expired.

Verizon spokesman Richard Young said the company's last strike lasted 18 days in 2000 and cost it $40 million.

Chris King, an analyst at Stifel Nicolaus, said in a research note on Monday that this strike would not be as costly since the company's wireline business has shrunk since 2000.

King estimated the daily costs of the strike would be between $1 million and $2 million. King, who has a "buy" rating on Verizon, said he expects slower-than-usual installations.

Analysts said Verizon shares may have outperformed the market on Monday because the telecommunications sector is seen as a relatively safe haven. They saw the strike as a vital opportunity for the company to push for lower costs in its wireline business.

Bernstein analyst Craig Moffett said Verizon could lose some customers at least in the short term due to the strike, to cable rivals such as Cablevision Systems (CVC.N), Comcast Corp (CMCSA.O), or Time Warner Cable (TWC.N).

"This is medicine they need to take to get this business on a stable footing," said Moffett who calculated that Verizon's roughly 1.6 percent return on capital investments pales in comparison to its roughly 7.5 percent cost of capital.

If customers hear of a delay in service installations at Verizon they would likely call a rival instead, he said. "The longer (the strike) goes on the bigger a problem it becomes."

Verizon shares closed off $1.93, or 5.5 percent, at $33.12, and rival AT&T fell $1.23, or 4.25 percent, to $27.70, both on the NYSE. (Reporting by Sinead Carew, Roy Strom, Dhanya Skariachan and Nadia Damouni; Editing by Derek Caney and Richard Chang)

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Comments (12)
TacoBill wrote:
These goons are running scared. They know that Verizon is phasing out its land line business and if they have to stand on their own as individuals in the “non-rigged” work environment, they would fail dismally because the could not compete. These thugs represent a Negative Value Added Cost to Verizon and its shareholders! Send them Packing, I say!

Aug 09, 2011 10:50am EDT  --  Report as abuse
Hardworker wrote:
Wow Taco, Why spend all those billions on FIOs if Vz is phasing out its land line business? Get your facts straight before posting your BS agenda. Its people like yourself that are destroying this country.

Aug 09, 2011 12:40pm EDT  --  Report as abuse
eeeeevergreen wrote:
The love of the telecommunications industry is the quality and dedication that drives a union worker for Verizon to perform each task so well, and with such dedication. The beauty of the fiber optics of the future is exciting. We will all grow together, Union along with Corporate and our customers!

Aug 09, 2011 12:57pm EDT  --  Report as abuse
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