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T-Mobile's (TMUS) Working Conditions Under Scrutiny

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Despite gaining a high number of subscribers, U.S. wireless carrier T-Mobile US, Inc. (TMUS - Free Report) has been facing increased scrutiny for its employee working conditions.

According to a recent report by Reuters, two institutional investors have questioned T-Mobile’s parent company, Deutsche Telekom, about the treatment of T-Mobile’s employees. Further, lawmakers have called on the German government, which controls 30% of Deutsche Telekom, to ensure that T-Mobile abides by the U.S. worker rights.

Notably, working conditions at T-Mobile was first under scrutiny last year, after T-Mobile’s main labor union, the Communications Workers of America (CWA), discovered that the company was abusing employee rights.

In Mar 2015, U.S. National Labor Relations Board (NLRB) had found out cases where the company had engaged in illegitimate working practices.

Meanwhile, CWA also alleged that the company’s executives have been harassing staff who failed to meet targets.

On the other hand, T-Mobile, which presently employs 45,000 workers, asserted that it abides by labor laws and dismissed allegations of ill-treating its employees.

Throttling Charge

Notably, the carrier’s practices were in question recently regarding its possible violation of the net neutrality rules laid out by the Federal Communications Commission (FCC).

In Nov 2015, T-Mobile launched a video streaming service named ‘Binge On’ with unlimited access to 24 streaming services from select partners. Such plans have been designed in a way that they don’t affect a customer’s existing data cap. Popularly known as ‘zero rated plans’, these have supposedly breached net neutrality principles in the past.

The Electronic Frontier Foundation has accused T-Mobile of throttling Internet speed for all video content on its network – that of its affiliates and video streaming services that do not fall under its Binge On service. Proponents of net neutrality deem this practice as a violation to the rules.

However, on its part, T-Mobile argued that any legal video streaming operator is free to join its Binge On network, if they duly meet the technical requirements.

Our Take

On the back of its low-priced service plans and free video and music-streaming offerings, T-Mobile has managed to steer past Sprint Corp. and continues to gain subscribers from U.S. telecom behemoths Verizon Communications Inc. (VZ - Free Report) and AT&T, Inc. (T - Free Report) .

Thus, settlement of such issues is a major concern for T-Mobile at this juncture because increasing accusations against its business practices may dent its image and prove to be a roadblock.

T-Mobile currently carries a Zacks Rank #3 (Hold).

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