In a significant move, T-Mobile US is set to undergo a substantial operational shift which will involve reducing its workforce by about 7%, equivalent to approximately 5,000 jobs. This mass layoff is primarily targeted at corporate and back-office positions, in an enterprise-wide strategy announced by company CEO, Mike Sievert, to decrease costs associated with customer acquisition and retention.
The essence of this strategy was made clear by Sievert in an email to the entire T-Mobile US workforce, which was later filed with the Securities and Exchange Commission. Sievert explained that the layoffs would mainly affect redundant roles or those linked with systems and business processes that are presently obsolete. The company is further considering a transition to a more centralised business model in certain departments to enhance operational efficiency and further reduce costs. Retail and customer service positions, however, will remain intact.
In Sievert’s words, “We’ve been out-running this trend by accelerating merger synergies, and building our high-speed Internet business faster than expected.” The CEO went on to place the blame on increased customer expectations and the burgeoning cost of meeting those expectations. He stressed the need for mobile operators to do more than just fast-track existing business processes to stay ahead of their competition.
Sievert’s justification for the strategy could appear reasonable when viewed independently. But just a month prior, T-Mobile US released its fiscal second-quarter results and raised its full-year guidance, all while boasting about “industry-leading growth in customers and profitability.” In this context, the news of the layoffs is a hard pill to swallow for employees.
Only recently, T-Mobile US reported net customer additions of 1.6 million and 299,000 postpaid net account additions in Q2. At that time, the company painted a different picture, celebrating its “best-in-class growth in service revenues, net income, and core Adjusted EBITDA”. In the second quarter, T-Mobile US’s revenue exceeded $19 billion, with an adjusted EBITDA of $7.4 billion and a net income of $2.2 billion.
While it is crucial to take note of financial and operational hitlines, the short space between the two announcements is particularly bitter for the telecom firm’s workforce. It seems the announcement of job cuts so soon after a prosperous Q2 report is a sore point. It’s safe to say that the unfolding story of T-Mobile US may change rapidly – stakeholders and observers alike should stay tuned for further updates.
