T-Mobile announced to its employees today that it is planning to reduce its workforce by about 7%, which equates to about 5,000 jobs.
In a letter sent to employees T-Mobile CEO Mike Sievert wrote that the cuts will impact employees in locations across the country, primarily in corporate and back-office, and some technology roles. This round of cuts will not affect retail and consumer care employees.
“After this process is complete, I do not envision any additional widespread company reductions again in the foreseeable future,” wrote Sievert. “Impacted roles are primarily duplicative to other roles, or may be aligned to systems or processes that are changing, or may not fit with our current company priorities.”
He added that T-Mobile is going to “build bigger, broader people manager roles with deeper spans and fewer layers…At the same time, we’ll also be decreasing our reliance and spend on external workers and resources.”
Today, Sievert said, “What it takes to attract and retain customers is materially more expensive than it was just a few quarters ago. We’ve been out-running this trend by accelerating merger synergies, and building our high-speed internet business faster than expected, and out-performing in a few other areas. However, it is clear that doing everything we are doing and just doing it faster is not enough to deliver on these changing customer expectations going forward.”
Recon Analytics analyst Roger Entner said, “It’s an admission that when you run a high-octane offense like T-Mobile does, this costs money.” He said T-Mobile mocks its competitors for buying new subscribers with subsidized phones, but recently it’s been doing the same thing. It just launched a new offering that allows people to get a subsidized phone every year.
“Acquiring as many customers as they do, costs a lot of money,” said Entner.
Why lay off employees when the company seems to be doing so well?
Sievert wrote, “In a company as successful as ours, the time to challenge the status quo and write the next chapter, is WHILE we are still successful. That’s how we sustain it. We need to move at the speed of technology, using data, AI and other tools, to deliver simplified digital experiences specifically curated for every customer.”
Entner said whenever he sees companies touting 5G standalone core, more automation, artificial intelligence and cloud-native technologies, “I also see job cuts. You need fewer people to deliver more data for lower costs. The two major costs centers are power and people.”
When T-Mobile’s then CEO John Legere was lobbying hard for the purchase of Sprint a few years ago, he promised that the combined company would create jobs.
Entner noted that before today, T-Mobile’s combined workforce with the Sprint employees was already down 9,000. “The merger did not add jobs,” he said. It’s the typical “synergies” situation where the company had redundancies across business units including finance, marketing, etc.
In his letter to employees Sievert said the workforce reduction “is about re-prioritizing our work and doing it differently, NOT about foisting more work on fewer people.”
In its 8K filing today T-Mobile estimated that it will incur a pre-tax charge of approximately $450 million in the third quarter of 2023 related to the workforce reduction. It’s holding to its previously issued guidance for fiscal year 2023.