Is there a bad omen for the US economy? T-Mobile plans to lay off 5,000 employees.
T-Mobile is the fastest-growing telecommunications operator in the United States. The recent layoffs came as a surprise, and the market believes it is a sign of increased uncertainty in the U.S. economy. The layoffs account for approximately 7% of the company's total workforce, with the majority of affected employees being in the company's operations, back-office, and some technical positions. The retail and consumer support departments will not be affected.
New signs of uncertainty have emerged in the US economy.
On Thursday, August 24th, US telecom giant T-Mobile announced plans to lay off 7% of its workforce, approximately 5,000 jobs. The majority of the affected employees are in the company's business and back-office positions, as well as some technical roles, while the retail and consumer support departments will not be affected.
In a statement, T-Mobile stated that the company expects to incur approximately $450 million in pre-tax expenses due to the layoffs in the third quarter of 2023. The company also mentioned that its financial guidance for the fiscal year 2023 remains unchanged.
CEO Mike Sievert explained in a letter to employees that the cost of attracting and retaining customers is "much higher than a few quarters ago." He stated that expanding the company's high-speed internet business and efforts in other areas are "not sufficient to meet the ever-changing customer expectations" and added that he does not anticipate any additional layoffs in the coming quarters.
This move indicates that T-Mobile is seeking to offset the impact of a new round of significant discounts and free phone promotions during the holiday season on its performance. Like other US carriers, T-Mobile is facing challenges in dealing with slowing user growth as cable TV giants Comcast and Charter Communications have attracted hundreds of thousands of new customers by offering free mobile lines.
As of the end of last year, T-Mobile had approximately 71,000 employees.
T-Mobile, the fastest-growing telecom operator in the US, surprised many with this round of layoffs. Last month, the company reported better-than-expected performance and raised its user growth expectations for this year. Its performance outperformed competitors Verizon and AT&T, both of which disappointed the market with their customer growth.
In 2019, former T-Mobile CEO John Legere claimed that the merger between T-Mobile and Sprint would create "new, high-quality, high-paying job opportunities" in the coming years. As for the upcoming layoffs, market analysts believe that this indicates the company may be preparing for an economic slowdown.
Since the beginning of 2021 until the first half of this year, AT&T has also been laying off employees, with 74,130 employees, or 32% of its workforce, being laid off through asset divestitures and other means. AT&T has raised its cost-cutting target for the next three years by $2 billion to $8 billion. The Dallas-based telecom giant is currently restructuring its business, reducing over 300 offices nationwide to 9 service centers, which means the company will further reduce its workforce by 6% to 15%.
Data from Layoffs.fyi shows that in the US tech industry this year, 965 companies have laid off over 230,000 employees.
This year, the majority of tech layoffs have been concentrated in niche sectors related to retail, consumer goods, hardware, healthcare, and transportation.
