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Despite pledge, T-Mobile has cut 5K jobs since Sprint merger

When Deutsche Telekom was hailing the benefits of a planned merger between its T-Mobile US subsidiary and Sprint, the German operator made a striking pledge on jobs.

"The overall plan is for the larger company to employ more staff than the two previous companies put together," it wrote in a statement on its website published in April 2018.

"For the employees of this company, nothing is worsening," said CEO Timotheus Höttges in a supporting video. "The opposite is the case."

But documents filed last week with the US Securities and Exchange Commission (SEC) provide irrefutable evidence that several thousand jobs have disappeared since the merger was mooted.

At the end of 2018, the two operators employed about 80,500 people, according to earlier SEC filings, and there were "loosely" around 80,000 employees after the merger was sealed, a T-Mobile spokesperson previously told Light Reading. Some 5,000, more than one in 20, have subsequently left the business.

The revelation that staff numbers have dropped to about 75,000 does not come as a total surprise. Mergers usually result in job losses as overlapping roles are eliminated.

"The idea of merging two companies without it resulting in redundancies is quite remote," said Bengt Nordström, the CEO of consulting firm Northstream (now a part of Accenture), shortly after the merger plans were announced.

"You don't need two core network managers."

In fact, the "synergies" that companies can realize by pooling resources and then shedding costs are typically one of the main attractions of a merger.

Even as it was promising to create jobs, Deutsche Telekom reckoned it could save about $6 billion annually by 2024 if it pulled off the merger by the end of 2018. Last year, it managed to reduce costs by around $1.3 billion, it said in its recent financial update.

Contradicting the claims

The tone of company discussion about jobs also changed once the merger was a fait accompli. In June, euphemists at T-Mobile lobbed the language smoke bomb of "workforce evolution" into a statement about the shape of the business in future.

T-Mobile would be creating 5,000 new jobs, it said, while an unspecified number of employees "will be supported in their efforts to find a new position outside the company."

In the meantime, financial reports from Deutsche Telekom suggested T-Mobile had cut jobs. At the half-year mark, the German operator recorded 70,807 full-time employees in the US, far fewer than the figure of 80,000 provided by a T-Mobile spokesperson or the 80,500 for T-Mobile and Sprint combined, according to earlier SEC filings.

The situation was unclear until last week because Deutsche Telekom does not include details of part-time employees or contractors. Moreover, between June and December, it recruited nearly 500 new full-time workers for its US business, finishing 2020 with 71,303 altogether.

Table 1: Employee totals at US operators

2015 2016 2017 2018 2019 2020
AT&T 281,450 268,540 280,000 268,220 247,800 230,760
Sprint 30,000 28,000 30,000 28,500 27,000 N/A
T-Mobile US 50,000 50,000 51,000 52,000 53,000 75,000
Verizon 177,700 160,900 155,400 144,500 135,000 132,200
Sources: Operators, SEC filings, Light Reading.

From the outset, Communications Workers of America (CWA) has been warning that a merger would put 30,000 jobs at risk across the industry, including positions at authorized retailers and prepaid stores.

In July, it cited evidence of store closures and job cuts. CWA analysis of California's retail store market showed T-Mobile had closed 16% of Sprint's retail locations and 6% of T-Mobile branded stores between April and July.

All that "directly contradicts the company's claims throughout this proceeding that there was no plan to change the retail footprint and that the merger would create jobs," said the union.

Future growth in jobs would buck the trend at Deutsche Telekom, which has cut more than 18,500 full-time roles outside the US since the end of 2016, nearly 11% of the total.

That said, the number for T-Mobile had been creeping up before the Sprint merger. As it builds out its 5G network, it will need additional engineers and technicians. Its goal of leapfrogging Verizon to become the biggest US mobile operator by customer numbers may be hard to achieve without extra flesh-and-blood resources.

Burgeoning debt

At the same time, Deutsche Telekom still has a long way to go on those synergies. It is also under pressure to reduce group net debts that have spiralled to about €120 billion ($144.5 billion) since the merger happened.

At 2.8 times what Deutsche Telekom makes each year in basic earnings, that strays outside an internal comfort-zone ratio of 2.25 to 2.75. It is about €49 billion ($59 billion) more than Deutsche Telekom's market capitalization.

Unfortunately, for employees, automation of some telco roles is becoming easier thanks to new technologies, while the coronavirus pandemic has propelled shoppers to visit online instead of physical stores, with ramifications for retail staff.

Deutsche Telekom plans to shift most of its IT workloads to the public cloud by 2025, and would subsequently have less need for in-house IT specialists. Vodafone, a European rival, has already cut hundreds of technical jobs by automating its network operations centers.

US competitors are also slashing headcount. AT&T and Verizon together cut nearly 20,000 jobs last year, about 5% of their total.

T-Mobile's latest update means that nearly one in five jobs listed by AT&T, Sprint, T-Mobile and Verizon has disappeared since 2015 as industry revenues have grown.

In 2015, T-Mobile was making about $650,000 per employee. Last year, it generated almost $912,000. For workers at the company, that is not a source of comfort.

UPDATE: T-Mobile has provided the following statement: "We're not backing away from our commitment on jobs. In 2020 we worked through the integration and as with any merger we addressed some redundancies, however we have continued hiring in spite of a complex pandemic environment. We currently have nearly 3,000 job openings, only a portion of which are part of our Un-Carrier Job initiative that we launched last summer to hire 5,000 more employees."

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— Iain Morris, International Editor, Light Reading

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