T-Mobile will lay off around 5,000 employees, or about 7 percent of its workforce, as the company works to streamline its operation amid a slowing wireless economy.
The layoffs were announced in a letter distributed among T-Mobile employees and filed with the U.S. Securities and Exchange Commission (SEC) this week, in which T-Mobile Chief Executive Officer Mike Sievert affirmed the majority of the job cuts would be concentrated in corporate, back-office and some technology roles.
Retail workers and customer support specialists are not expected to be impacted by the job losses. Some customer support hubs were consolidated earlier this year, The Desk reported in June.
Affected employees should be fully notified by the end of September, and will be offered extensive post-employment benefits, including severance and transition leave payments commensurate with tenure. Tuition assistance will also continue to be provided, and T-Mobile will establish a new “alumni benefit” that will offer a discount on service and accessories for the life of the former employee.
“Importantly, employees leaving us in good standing will have privileged access to T-Mobile hiring and recruiting for appropriate roles now and in the future, as we continue to build our organization in other areas,” Sievert said in the note.
Once this round of layoffs is complete, Sievert said he did not anticipate additional layoffs in the future.
Executives say the job losses are necessary to offset customer acquisition costs, which have increased in a turbulent economy and as its rival networks, AT&T and Verizon, mature their own fifth-generation (5G) wireless networks.
T-Mobile was long seen as the pioneer in the domestic 5G market, owed to its early launch of the network thanks in large part to its massive stockpile of wireless spectrum and its blockbuster merger with former competitor, Sprint.
“What it takes to attract and retain customers is materially more expensive than it was just a few quarters ago,” Sievert said. “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.”
During its most-recent financial quarter, T-Mobile revealed its in-store and online sales were down about 2.5 percent compared to last year. It also revealed net customer additions had slowed considerably, a trend that was mostly offset by low customer churn.
The slowing customer additions suggest the wireless market has mostly topped out, with the majority of Americans having access to a smartphone, the primary driver of service and sales at wireless companies like T-Mobile.
In recent months, and to spur additional sales, all three wireless providers have focused their marketing efforts on convincing their current customers to ditch land-based broadband Internet service in favor of their fixed wireless home and business Internet solutions, which operate on the same 4G LTE and 5G networks. T-Mobile sells its fixed wireless home Internet service for about $50 per month when bundled with at least one eligible wireless line, though some customers pay less.
The full note from T-Mobile CEO Mike Sievert sent to employees this week is below:
I am reaching out today to share some important news that I wanted to be sure you heard directly from me. Starting this week, and over the next five weeks, we will be making changes to our organization that will result in the reduction of some positions at the company. These shifts will impact close to 5,000 positions, a little under 7 percent of our total employees in locations across the country, primarily in corporate and back-office, and some technology roles. The retail and consumer care experts who take care of our customers will not be impacted. After this process is complete, I do not envision any additional widespread company reductions again in the foreseeable future.
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. Some areas of the business will be implementing more centralized models where they can improve efficiency and effectiveness and save costs. We’re also taking opportunities to build bigger, broader people manager roles with deeper spans and fewer layers, to provide longer-term growth opportunities. At the same time, we’ll also be decreasing our reliance and spend on external workers and resources.
I know this email will create uncertainty, but I believe transparency about what is happening, and how we’re taking care of our impacted colleagues, is important. I also want to take this opportunity to explain a bit more about why we are making these shifts and share why I am optimistic about what’s to come.
We’ve been able to celebrate tremendous successes together over the past decade, and right now, our company is at a pivotal crossroads. As the Un-carrier, we don’t hesitate when customer demands change – we step up and meet those demands, every time. That’s how we became successful. And today, thanks in part to the added competition we brought due to our merger and historic network build, those customer demands are higher than ever.
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.
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.
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. Instead of just taking the model that we know and trying to run faster, we can take it to the next level. We know the work ahead of us will look different than the work behind us, and that means how we do the work needs to change, too. 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.
In addition, I want this to be a better place to work for every employee going forward. We can be smarter, faster, and even better at competing, by streamlining our operating model and structure to reduce the complexity. You have my commitment that our organization will create more individual empowerment and faster decision-making over time. This is about re-prioritizing our work and doing it differently, NOT about foisting more work on fewer people. And, it is about optimizing every dollar, so it can be used to deliver a better network, a better value, and a better experience for our customers.
It is hard to part ways with our coworkers who will be impacted, and I want to let you know that our focus during this time of change is to do everything we can to treat each of them with as much care and support as possible. Our plan is to have all notifications complete by the end of September. This is a bit of a longer timeframe because we want to ensure we treat every one of our people with respect and personal support. We have zero intention of being a faceless – or heartless – company in a situation that is already difficult.
We will also provide competitive severance payments based on tenure, plus an additional 60 days minimum of transition leave, which includes pay and benefits, plus accelerated vesting of their next stock vest, continuation of tuition reimbursement benefits, career transition services, and a new T-Mobile alumni service discount good for life. Importantly, employees leaving us in good standing will have privileged access to T-Mobile hiring and recruiting for appropriate roles now and in the future, as we continue to build our organization in other areas.
This is a large change, and an unusual one for our company. We’re tackling the tough decisions now, because I wanted to make sure that people working here are not wondering what’s next, after this process concludes. As I mentioned at the top, because of this, we do not envision making additional large-scale reductions across the company again in the foreseeable future.
This is a company and team that looks around corners, that anticipates change and stays ahead of it. This is how we’ve become successful. We’ve always been willing to embrace rapid change in this industry, put customers first, and challenge the status quo where needed to make sure every customer has the best experience we can deliver, while also meeting our commitments to shareholders. Today’s changes, while difficult, are being pursued so that we can continue that tradition and put the company on a stronger footing for years to come.
Roger Entner, an analyst with Recon Analytics, told industry news outlet Fierce Wireless that the layoffs were a symptom of “running a high-octane offense.” While the company has long teased its rivals for using revenue-generating tactics like subsidizing phones and raising plan prices, T-Mobile has started taking the same approach, Entner said.
Earlier this month, T-Mobile introduced a new $100 per month plan called “Go5G Next” that allows customers to upgrade their smartphones early, provided they purchase them on an installment plan. Customers still have to fork over cash to pay taxes on the device, which is charged based on the full retail amount of the phone, and may also have to pay a substantial deposit for more-premium phones.
Like most plans, T-Mobile lowers the per-line price of Go5G Next when customers add two or more lines. Taxes and fees are included, as are perks like free access to Netflix and Apple TV Plus, high speed data in most foreign countries and free access to in-flight WiFi on some domestic carriers.