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It's Been a Bad Week for Telecommunications Workers

By Evan Niu, CFA – Jun 18, 2020 at 9:00AM

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Between T-Mobile and AT&T, thousands of employees are getting laid off.

T-Mobile's (TMUS -0.01%) long-standing assertion that its blockbuster merger with Sprint, which closed earlier this year after two years of legal and regulatory battles, would create thousands of jobs has always strained credulity. Eliminating redundant jobs is a typical part of realizing cost synergies from any business combination. The Un-carrier had already laid off some workers ahead of the deal's consummation.

This week, hundreds more telecommunications employees are losing their jobs.

Interior of a T-Mobile store in New York City

Image source: T-Mobile.

The Un-carrier ditches Sprint workers

T-Mobile is now implementing another round of layoffs that will predominantly affect hundreds of Sprint workers while seemingly sparing T-Mobile employees for the most part, according to TechCrunch. The cuts will impact Sprint's inside sales division that catered to small businesses. T-Mobile confirmed the cuts and framed the move as a "workforce evolution."

The telecommunications company said that it still plans to add 5,000 new positions over the next year across various departments, such as customer service. However, employees who have redundant positions are "being asked to consider a career change inside the company, and others will be supported in their efforts to find a new position outside the company."

T-Mobile had made commitments to various states to create or maintain jobs as part of a campaign to get numerous state attorneys general to withdraw from a lawsuit that tried (and failed) to block the deal on anticompetitive grounds. It's not clear what the net effect on head count will be even after factoring the 5,000 new jobs.

AT&T headquarters

Image source: AT&T.

Ma Bell is cutting thousands of jobs

Separately, AT&T (T -2.12%) is now planning to cut 3,400 of jobs and close 250 retail stores, in part due to impacts related to the COVID-19 pandemic, according to Axios. Ma Bell pointed to reduced demand for certain older offerings, and the coronavirus outbreak has affected retail sales across the board.

The Communications Workers of America (CWA), one of the largest unions in the country that represents telecommunications and information technology professionals across numerous industries, was given a heads-up about the cuts and issued a scathing statement condemning the action.

Meanwhile, AT&T remains embroiled in a skirmish with activist Elliott Management, which accumulated a multibillion-dollar stake in the company late last year and began agitating for changes in an effort to maximize shareholder value. That included calling for drastic cost cuts, as Elliott argued that AT&T had become a bloated conglomerate.

"Last year, controversial vulture hedge fund Elliott Management purchased a small stake in AT&T in order to push the company to extract profits by eliminating jobs, outsourcing work, and divesting critical assets and to drive up the share price through stock buybacks," CWA said.

AT&T's total head count at the end of January was approximately 246,000, according to regulatory filings, with 40% being represented by CWA or other unions.

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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