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AT&T (T) to Retrench Slovakia Workforce Amid Demand Woes

According to some media reports, AT&T Inc. T is likely to trim its workforce in Slovakia as part of its effort to reduce costs amid lower demand trends. Although the company has refused to comment on the news, local workers’ unions expect about 10% of the workforce to be affected by the purported move.

The landlocked Central European country has been one of the key markets for AT&T, where it has been active since 2002. Operating as AT&T Global Network Services, the company employs around 2,800 people in Slovakia that is well known for its highly skilled workforce, an enviable quality of life and an investment-friendly economy. The company primarily used this workforce to serve the sales, service management, service delivery and assurance services in Europe, the Middle East and Africa region.

However, the coronavirus pandemic hit the country hard with strict lockdown restrictions forcing businesses to shut down. With record infections and emergence of the new virus strain, the economy has been adversely impacted, and unemployment across the country, with a population base of 5.5 million, increased from 5.2% in March 2020 to 7.4% at present. This induced a downtrend in customer demand for legacy products and services, affecting the profitability of companies like AT&T.

In order to tide over the storm, AT&T is reportedly mulling to cut as much as 300 jobs in the country. Notably, the company is facing a steady decline in linear TV subscribers and legacy services across barriers. High-speed Internet revenues are also contracting due to legacy DSL decline, simplified pricing and bundle discount. Moreover, TV content-cost pressure, high programming costs and new video platform expenses are fast eroding margins. Continued cord-cutting remains a perennial challenge as consumers increasingly cancel pay TV packages for cheaper streaming options from Netflix, Inc. NFLX,, Inc. AMZN, Hulu and other services. As AT&T tries to woo customers with healthy discounts, freebies and cash credits, margin pressures tend to escalate. This is likely to affect its growth potential to some extent.

Furthermore, AT&T had been plagued by a debt-laden balance sheet with long-term debt of $152,980 million as of Sep 30, 2020. The company decided to cancel its stock buyback program due to the severity of the coronavirus outbreak. The evolving nature of the contagious disease and its grave impact on the economy forced AT&T to reconsider the buyback plan, as it is yet to fathom the impact on its business with lack of visibility. Stringent cost-cutting measures through layoffs and elimination of redundant operations has helped the company to stay afloat.

The stock has lost 24% in the past year compared with the industry’s decline of 2.3%.

We remain impressed with the inherent growth potential of this Zacks Rank #4 (Sell) stock. A better-ranked stock in the industry is Gogo Inc. GOGO, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Gogo delivered a positive earnings surprise of 23.9%, on average, in the trailing four quarters.

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AT&T Inc. (T): Free Stock Analysis Report, Inc. (AMZN): Free Stock Analysis Report
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