AT&T to Cut 12,000 Jobs, Slash Capital Outlays

But Marketing Spending Appears Safe Amid Belt-Tightening

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NEW YORK ( -- In the latest sign the telecom industry is hunkering down for worsening economic ills, AT&T -- the country's second-largest advertiser -- said it was cutting jobs and scaling back next year's capital expenditures. Marketing, however, does not seem to be immediately affected at AT&T, which spent some $3.21 billion last year, behind only Procter & Gamble Co.

AT&T said today it would lay off 12,000 workers, or about 4% of its work force, citing "a changing business mix" among other factors. The marketer has been losing fixed-line subscribers as consumers increasingly cut the cord and mobile phones become their sole voice communication device.

Media industry relying on telecoms
A spending cut by AT&T would be unwelcome news, to say the least, for a media industry heavily reliant on free-spending telecoms that have taken up slack from the beleaguered auto industry. Already the media industry is girding for a $600 million hit over the next four years from the country's fourth-largest advertiser, General Motors Corp.

AT&T declined to comment on whether hunkering down will affect spending or its future marketing plans. One executive close to the company said there has been no discussion with the company's advertising agency, Omnicom Group's BBDO, New York. And analysts say they don't foresee cuts in the wireless area, at least, where AT&T will try to protect its turf.

"Sales and marketing budgets will be smarter, but remain intact more or less," said telecom analyst Jeff Kagan. "Maybe they will reduce what they [spend], but the nuts and bolts will remain."

The latest measures should come as little surprise. AT&T announced in early October it was reorganizing its management and business units, setting off speculation that layoffs were coming. AT&T said while job cuts are occurring in some areas, it would bulk up in other areas, such as wireless, video and broadband.

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