AT&T Purchase Of DirecTV Will Likely Lead To Some Job Cuts, But Nothing Like What Happened After BellSouth Acquisition

The proposed $67 billion deal by AT&T Inc. (NYSE:T) to acquire DirectTV (NASDAQ:DTV), which would marry a phone giant to a satellite TV provider to create the world’s largest provider of subscription content, was being called on Monday a win for everyone by the CEOs of both companies, but acquisitions like this typically involve layoffs and for those being laid off the deal will be a loser.

Fortunately for the companies’ combined 275,000 employees, including the 31,500 DirecTV part-time and full-time workers, major workforce cuts are not in the works. AT&T Inc. (NYSE:T), by far the larger of the two companies, has already reduced its employee headcount by 22 percent since 2007 in the wake of the company’s $86 billion acquisition of Atlanta-based BellSouth Corporation.

On Monday, AT&T said it expects to be able to save $1.6 billion by three years through “cost synergies” after the closing of the deal pending regulatory approval, a process that could take up to a year. “Cost synergies” is one of those corporate turns of phrase that can mean a lot of things, including layoffs.

Jonathan Schildkraut, managing director of telecom equity research at Evercore Partners, says that most likely the companies are talking primarily about their ability to combine their subscribers (16 million from AT&T and 20 million from DirecTV) in order to negotiate lower costs for content. With all those potential viewers combined under one roof, AT&T would have a better bargaining stance to acquire broadcast rights for, say, NFL games or HBO programs, to beam “across all the screens,” as AT&T CEO Randall Stephenson said during Monday’s conference call.

“I wouldn't expect massive headcount reductions, but some is probable,” said Schildkraut.

Acquisitions tend to lead to workforce reductions. In 2005 AT&T increased its workforce by nearly 17 percent from the previous year. After it acquired BellSouth the workforce jumped to 310,000. But since then the company whittled the number down to 243,000 last year. In other words, the “cost synergies” of AT&T’s acquisition of BellSouth included significant reductions in the combined workforce, but left AT&T with considerably more employees than it had before the acquisition.

“Our valued employees will become a part of a great company with tremendous growth potential and I think even greater career opportunities,” DirecTV Group (NASDAQ:DTV) CEO Michael White said in a conference call Monday morning with Stephenson, who said Dallas-based AT&T has no plans to relocate DirecTV from its home-base in El Segundo, California.

The Communications Workers of America, which represents many AT&T employees, and AT&T did not return requests for comment.