FairPoint CEO’s “Confidence” in Strike Contingency Plans Contradicted by Serious Service Problems

Amy MasciolaPress Release, StrikeLeave a Comment

For Immediate Release: Wednesday, Nov. 5, 2014
Contact: Jim McNeill, C 202-213-1614, Jim@FairnessAtFairpoint.com

In FairPoint’s just-released earnings report, CEO Sunu attempts to gloss over service disruptions plaguing the company’s customers

FairPoint’s own analysis shows incoming calls surged 250% in strike’s first week; this week Vt. officials threatened to probe company’s poor service

FairPoint Communications attempted to quell investor concerns today about serious service disruptions that have plagued the company’s customers during a nearly three-week-old strike.

In FairPoint’s third quarter earnings report, CEO Paul H. Sunu expressed “confidence” in the company’s “ability to provide continuity of service to customers during this work stoppage.” But FairPoint’s own data shows Sunu’s confidence is misplaced.

According to a separate press release FairPoint issued this morning, the company admitted its consumer call center was overloaded during the first week of the strike, with call volumes more than 250 percent higher than expected.

In that press release, issued by FairPoint spokeswoman Angelynne Beaudry, the company acknowledged that “long answer times had customers calling back multiple times.” Beaudry admitted that FairPoint has struggled to respond to service requests, and said company officials “regret some of our customers have been inconvenienced as we had to reschedule their appointments.”

Roughly 2,000 workers in Maine, New Hampshire and Vermont have been on strike against the North Carolina-based telecom company since October 17.

FairPoint’s workers began negotiations for a new contract in April and have offered the company more than $200 million in cost savings. But officials at FairPoint — whose largest shareholder is Wall Street hedge fund Angelo, Gordon — refused to make any substantive compromises during five months of bargaining.

In August, FairPoint officials abruptly ended negotiations and imposed terms and conditions that threaten to degrade the company’s skilled workforce. The imposed terms include a controversial provision that allows FairPoint to outsource work to unproven and poorly skilled contractors like the ones currently struggling to maintain its systems in northern New England.

“FairPoint was clearly unprepared for the strike they provoked,” said Peter McLaughlin, chair of IBEW System Council T-9. “FairPoint is proving that you can’t maintain quality customer service while attacking the skilled workers who provide it.”

The wave of service disruptions across northern New England has been the subject of multiple stories in the media and has raised significant concerns among regulators. Yesterday, Vermont’s Public Service Department told FairPoint to reduce the number of customer complaints or face an investigation. The department said it has seen a spike in long repair times since the strike began.

Investors also have reason for concern about the company’s financial performance as a result of the strike. FairPoint reported $22.3 million in labor negotiation-related expenses during the first nine months of 2014, and the bulk of that amount, $17.1 million, came in the 3rd quarter. FairPoint’s 4th quarter expenses will reflect additional labor negotiation-related expenses as a result of the strike.

The company’s 3rd quarter operating expenses increased $20.4 million to $200.4 million primarily due to increased labor negotiation expenses. Net losses for the 3rd quarter increased $15.1 million to $37.8 million, and the company ended the quarter with negative shareholder equity of $395 million. In addition to the financial challenges FairPoint faces, the company’s network and customer service may degrade as the strike continues.

FairPoint CEO Sunu sidestepped multiple questions from analysts about the strike during a conference call this morning about the earnings report. Sunu said he was declining to answer the strike-related questions because the company is facing unfair labor practice charges that are pending before the National Labor Relations Board.

The International Brotherhood of Electrical Workers (IBEW) System Council T-9 includes local unions in Maine, New Hampshire, and Vermont and represents nearly 1,700 employees at FairPoint Communications. The Communications Workers of America (CWA) Local 1400 represents nearly 300 FairPoint employees in the three states. For more information, visit www.FairnessAtFairpoint.com.