T-Mobile US cuts jobs despite industry-leading profitability

T-Mobile US has become the latest telecoms operator to cut staff, citing the increasing cost of attracting and retaining customers.

The US mobile operator revealed on Thursday that over the next five weeks it will make changes to its business that will result in around 5,000 job cuts, which amounts to just under 7% of its workforce.

The cuts will come primarily from corporate and back-office roles, while some technology positions will also be eliminated, the operator’s chief executive Mike Sievert said in an email to staff, reproduced in an SEC filing. T-Mobile will mainly eliminate duplicate roles, Sievert said, or those aligned to systems and process that are changing or no longer fit with company priorities. In some areas of the business the telco plans to implement more centralised models to improve efficiency and reduce costs, he said. Retail and customer care jobs will be unaffected.

“After this process is complete, I do not envision any additional widespread company reductions again in the foreseeable future,” Sievert said, which will be scant consolation to those about to lose their jobs.

While the CEO’s explanation initially makes it seem that duplication – perhaps attributable to the Sprint merger – and the simplification of certain systems are the core reasons for the move, he goes on to basically blame customer expectations and the rising cost of satisfying those customers.

“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,” Sievert wrote.

“Today’s changes are all about getting us efficiently focused on a finite set of winning strategies, so that we can continue to out-pace our competitors and have the financial capability to deliver a differentiated network and customer experience to a continually growing customer base, while simultaneously meeting our obligations to our shareholders,” he added.

Putting it like that makes it all sound pretty reasonable. But when you consider that less than a month ago T-Mobile US was crowing about delivering “industry-leading growth in customers and profitability,” in a second quarter results announcement in which it also hiked full-year guidance, it becomes a bitter pill to swallow for employees.

Indeed, T-Mobile US posted Q2 postpaid net account additions of 299,000, net customer additions of 1.6 million, and a number of other operational metrics that it declared to be the best in the industry. While that might seem to gel with Sievert’s point about acquisition and retention costs, and doing the right thing by shareholders, the telco’s own words at the time tell a different story.

“The company continues to translate its industry-leading customer growth into best-in-class growth in service revenues, net income, and core Adjusted EBITDA, while raising full-year 2023 guidance,” it said. “Furthermore, T-Mobile continues delivering on its plan to return value to stockholders, buying back $3.5 billion of common stock throughout the quarter.”

T-Mobile US generated over $19 billion in revenue in the three months to the end of June and adjusted EBITDA of $7.4 billion, while its bottom line came in at $2.2 billion.

Of course, it is over-simplistic to judge T-Mobile US’s business on its headline operational and financial statistics alone. But the short time that elapsed between the two announcements makes the job cuts news particularly galling for its staff.

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