AT&T late last week filed an 8-K form with the Securities and Exchange Commission stating that it will take a one-time $10 billion charge when it reports earnings on Jan. 27. Most of that charge is related to the company’s pension plan, but $2.1 billion is related to the abandonment of copper assets.
The nation’s second-largest carrier is moving to gradually abandon landline service over copper wires in some areas, hoping that customers there can transition to wireless service. Verizon Communications launched a similar initiative on New York’s Fire Island after Hurricane Sandy damaged the copper wire there, but reversed its plans in response to public protest.
AT&T’s filing did not say where it plans to abandon copper assets. The company said that it analyzed its network assets during the fourth quarter, and decided that specific copper assets will not be necessary to support future network activity due to declining customer demand for legacy voice and data products, and the migration of the networks to next-generation technology.
In addition to the $2.1 billion non-cash charge related to the copper assets, AT&T will take a $7.9 billion charge related to its pension plans. The 135-year-old company is known for its first-class benefits, which for many workers have included defined benefit pension plans. On average, AT&T’s retired workers are living longer, so the cost of supporting them is rising. The company said it has decreased the assumed discount rates used to measure its pension obligation to 4.3%, and that the assumed discount rate for its post-retirement obligation is now 4.2%.
The Centers for Disease Control and Prevention recently reported that U.S. life expectancy increased one-tenth of a year from 2011 to 2012. That report noted that life expectancy for a person turning 65 in 2012 was an average of 19.3 years. At the end of the third quarter of 2013, AT&T said it counted 247,700 employees in its workforce.
AT&T’s decision to take a charge against earnings comes as the carrier is balancing a proposed $48.5 billion purchase of DirecTV with its ongoing need to invest in its network. The carrier is nearing completion of its $14 billion Project Velocity IP, and said late last year that its overall capital expenditures will slip from an estimated $21 billion in 2014 to $18 billion in 2015.
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