DT boss prefers US to Europe, but telcos are shrinking in both

Deutsche Telekom's boss appeared to have missed the news about the US telecom sector cutting thousands more jobs when he showed up at a conference organized by the Federation of German Industries earlier this week. "We are growing people and employees – 75,000 people in the US," said a visibly agitated Timotheus Höttges during a panel discussion. "At the same time, Europe has lost 50% of the workforce in the telecommunications market."

His broader point was that the US remains far more attractive than Europe to investors, businesspeople and entrepreneurs, which explains Deutsche Telekom's prioritization of T-Mobile US over less healthy parts of its empire. But the suggestion that a more investor-friendly US telecom sector has seen fewer job losses in recent years is misleading. Despite what Höttges said this week, T-Mobile US and Sprint employed more people before their 2020 merger than they do today. And AT&T has cut a bigger percentage of its workforce since 2015 than any of Europe's main telecom incumbents.

The AT&T jobs now at risk are managerial ones, according to a recent Bloomberg report based on an interview with CEO John Stankey. He effectively appears to have given as many as 60,000 employees an ultimatum: Either start showing up for work at one of nine office locations in the US or find another employer. According to the Bloomberg report, around 9,000 of the affected managers would face a long commute if they decided to stay.

Stankey is notoriously enthusiastic about cutting jobs in the way Apple CEO Tim Cook is about squeezing Chinese suppliers on costs. Back in 2015, before Stankey was boss, AT&T employed a grand total of 281,000 people, according to its annual report filing with the Securities and Exchange Commission. And this was before its $85 billion move for Time Warner, one of the worst deals of the century. After offloading that business, AT&T finished March this year with 157,800 employees.

In other words, it has cut 123,650 jobs, or 44% of its workforce, in about seven years. This is only 5,717 fewer jobs than BT, Deutsche Telekom (excluding employees at its US division), Orange, Telecom Italia, Telefónica and Vodafone have cut in total over the same period. And AT&T is not some unique US case. Verizon, the other one of the big three US telcos, has removed 60,600 positions since 2015, equal to roughly a third of its workforce at the end of that year.

Soothsayer mode

When seeking permission for a merger between T-Mobile and Sprint, Deutsche Telekom won over competition authorities by insisting – and we'll use Deutsche Telekom's own words here – that the "overall plan is for the larger company to employ more staff than the two previous companies put together." But this turned out to be a fib, unless you buy into the spurious logic aired recently that Deutsche Telekom was in soothsayer mode, and referring to the number of employees T-Mobile and Sprint would have employed now had they not been allowed to merge. Go along with that nonsense and just any number could be justified.

What happened was that combined headcount for T-Mobile and Sprint fell from about 80,500 at the end of 2018, the year the merger was announced, to 71,000 in December 2022. Light Reading has double checked and is quite sure that 71,000 is less than 80,500, even deploying some basic math skills to work out the difference is precisely 9,500.

In fairness, Deutsche Telekom does appear to have added full-time employees in the US this year (the German operator does not report numbers of part-time employees or contractors). After dropping from 71,303 in 2020 to 67,088 last December, headcount (full timers) had risen to 68,890 by the end of March. But the figure is still 2,413 less than it was in 2020.

More striking is the disappearance of 188,150 jobs across AT&T, Sprint, T-Mobile US and Verizon between 2015 and the end of last year. It means their combined workforce, with Sprint now subsumed into T-Mobile US, has shrunk by 35% over this seven-year period. Nor are there signs of other telcos springing up to replace these jobs. Dish Network is the only greenfield mobile operator with nationwide ambitions to have materialized in recent times. And its total headcount, including its older pay-TV interests, fell from 18,000 in 2015 to 14,200 last year.

In the meantime, the 129,367 jobs cut by Europe's big incumbents over this period equals about 17% of their combined headcount in 2015. Höttges perhaps had an older reference point in mind, but this rather undermines his analysis of the situation in the US and Europe. One could postulate, as Deutsche Telekom evidently likes doing, that European operators would have made less aggressive cuts if mergers had been allowed and there were a smaller number of stronger players. But this has clearly not been the case in the US.

Jobs killers

The success of T-Mobile US has not been a sign of the overall telecom market's health. Yes, T-Mobile's share price has rocketed in the last few years, soaring 227% since the end of 2015. But AT&T's has dropped 47% over the same period, and Verizon's is down 23%. T-Mobile is an aberration. It has succeeded purely by adding customers at the expense of once-bigger rivals, previously distracted by diversification bids that ultimately failed.

Nevertheless, most European operators are probably similarly envious of the US. Many operate in relatively small four-player mobile markets, while the US has only three (ignoring Dish) across a vast area. Customers spend more, so there is a better opportunity to juice profits. But what really seems to upset Höttges is a miasma of European laws and rules that have little to do with telecom.

"Where are the cloud providers in Europe? Where is AI?" he said. If he were a startup dealing with GDPR, the Digital Markets Act and artificial intelligence laws currently in development, "I would not start my company here," he told conference attendees this week. Yet any differences between the US and Europe have had no impact on the fortunes of US telcos. None looks more technologically sophisticated or strategically diversified than its European equivalents.

To hear a jobs-terminating boss complain about the regulation of artificial intelligence is a little scary. Not so long ago, senior executives would play down its impact on the workforce, trotting out cliches about technology creating new and currently unimaginable jobs. More recently, Philip Jansen, the CEO of BT, has estimated it will eliminate 10,000 roles at his company this decade, about a tenth of the total. Telco bosses with similar downsizing plans must hope those pesky authorities don't interfere.

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— Iain Morris, International Editor, Light Reading