Labor Downsizing

I’m mystified when large internet service providers (ISP) and carriers have significant layoffs at a time when they seem to be doing well; it’s a pattern that we’ve seen over and over during the last several decades. The latest big layoff is coming from T-Mobile, which announced in August that it is eliminating 5,000 jobs, about 7 percent of its total workforce. However, a reduction of this size will boost earnings in the future. T-Mobile executives have been quoted saying the current cuts are about coming efficiencies from artificial intelligence (AI), automation, and other technology tools that will allow T-Mobile to operate more efficiently. But unless T-Mobile is onto some amazing innovations that the rest of the industry doesn’t know about, those future efficiencies are not here yet. It doesn’t take a lot of digging to understand the real reason for the T-Mobile layoffs. In the last twelve months, T-Mobile has spent over $11 billion to buy back shares of its own stock, about 7 percent of all outstanding shares. Buybacks are a huge drain on corporate earnings. Ultimately, companies like T-Mobile are putting free cash into buying their own stock to the detriment of growth or employees.