• T-Mobile has announced its plans to let go of 5,000 employees in the next five months.
• The current economic climate and rising customer acquisition and retention costs may be the primary reason.

In the latest round of layoffs by large corporations, T-Mobile announced that it plans to let go of 5,000 employees, or 7% of its workforce, over the next five weeks. According to the CEO, Mike Sievert’s letter to the company’s employees, these layoffs will majorly impact corporate and back office jobs that are “primarily duplicative” to other roles. The releases will also reduce the middle management layers. According to the letter, the company further plans to reduce its spending on “external resources and workers.” However, the layoffs won’t affect T-Mobile’s retail and consumer care employees who work directly with customers.

Cost and Economic Climate the Primary Reason for Layoffs?

The layoffs come a few months after big tech companies announced a slew of layoffs during the second half of last year and earlier this year. They also come at a time when organizations are grappling with rising costs and uncertain economic conditions. The letter said, “What it takes to attract and retain customers is materially more expensive than it was just a few quarters ago.”

In its quarterly earnings report last month, T-Mobile showed its sales to be down 2.5% year-on-year (y-o-y). The company’s net customer additions also slightly fell from the same period last year, though it posted record low customer churn and profit growth. The company’s stocks have fallen more than 7% since August 2022. T-Mobile’s shares were trading down around 1% since its layoffs announcement.

T-Mobile Plans To Narrow Its Focus

The letter said that in the three years since the company acquired Sprint, it has been working to streamline the combined businesses and accelerate the build-out of its high-speed internet business. That said, it was now critical for the company to narrow its focus.

“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,” the letter said. “Today’s changes are all about getting us efficiently focused on a finite set of winning strategies.”

The company plans to inform the employees being laid off by the end of September. Affected employees are expected to receive competitive severance packages based on their tenure, accelerated stock vesting, access to career transition services, and other benefits. Moreover, besides these layoffs, the company doesn’t see any additional releases for the foreseeable future.

Read the full report here.