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T-Mobile Starts Laying Off Workers Ahead of Closing Sprint Deal

By Evan Niu, CFA – Feb 29, 2020 at 10:00AM

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The Un-carrier had vowed to create jobs as part of its mega merger.

When T-Mobile (TMUS -2.01%) first proposed its megamerger with Sprint (S) nearly two years ago, the Un-carrier vowed that the deal would "create thousands of new American jobs." That assertion challenges the traditional thinking around mergers, which typically result in layoffs around redundant positions (oftentimes related to administrative roles) in the pursuit of cost synergies.

"It is true that most mergers do not create jobs," Sprint executive chairman Marcelo Claure told Congress a year ago. "This merger is the opposite." T-Mobile CEO John Legere also wrote a blog post in early 2019 describing how New T-Mobile would accomplish that goal. Legere estimated that the combined company would create 5,600 customer service jobs by 2021, and by 2024 the new company would employ over 7,500 more workers than the companies would separately.

T-Mobile store

Image source: T-Mobile.

Add in thousands more retail positions from new store openings, and New T-Mobile would create 11,000 more jobs by 2024, according to Legere's estimates. Yet T-Mobile has just started laying off workers in its prepaid segment.

Cutting prepaid workers

Light Reading reports that T-Mobile has started to inform some employees within its Metro by T-Mobile (rebranded from the MetroPCS acquisition) prepaid business of the bad news. However, it's not clear how many workers are being let go.

As part of a package of concession to regulators, T-Mobile and Sprint had agreed to divest prepaid wireless segments because T-Mobile already had a dominant position in that part of the market. Earlier this month, a federal judge cleared the $26 billion merger after numerous state attorneys general filed a lawsuit seeking to block the deal. Job losses were specifically one of the concerns that the attorneys general cited.

T-Mobile was able to convince many states to withdraw from the suit in part by making state-specific commitments to maintaining or creating jobs.

There could be more where that came from

Despite T-Mobile's assurances, the Communications Worker of America (CWA) union estimates that the transaction could put an estimated 30,000 jobs at risk. CWA is one of the largest unions in the country, representing approximately 700,000 workers across various sectors that work in communications-related roles.

"Throughout this process, regulators who are supposed to be protecting the public interest have ignored clear evidence that this merger would result in significant job loss for wireless workers," CWA president Chris Shelton said in a statement criticizing the court's decision. "We are grateful to the attorneys general who stepped in to try to protect workers and customers after President Trump's appointees at the FCC and Department of Justice ignored their concerns."

At the end of each company's most recent respective fiscal year, T-Mobile employed 53,000 full-time employees while Sprint had roughly 28,500 workers. Those figures do not include employees of independent franchise retailers. The deal is expected to close as early as April 1.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.

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