Deutsche Telekom Cuts 32,000 Jobs

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Deutsche Telekom AG (search), Europe's biggest phone company, said Wednesday that it plans to cut 32,000 jobs from its payroll in Germany in the next three years — 25,000 at its main operations and 7,000 from a staffing agency subsidiary.

But the company also said it would add 6,000 jobs as it focuses on more promising business opportunities.

Deutsche Telekom said the changing pace of the telecommunications industry led to the restructuring plans. The bulk of the cuts will come at the T-Com unit, which employs nearly 110,000 workers, and oversees fixed-line services in Germany. The company currently employs about 244,000 people overall.

"The worldwide realignment of the industry, the rapid pace of technological development and, in particular, the tough competitive environment in the fixed network and broadband sector in Germany ... intensify the challenges facing the entire Deutsche Telekom Group," Chief Executive Kai-Uwe Ricke (search) said.

"On the one hand, we have to cut jobs in old core markets; on the other, there are opportunities to create jobs in new innovative markets," he said.

The Bonn-based company said 7,000 jobs at its personnel subsidiary, Vivento, would be eliminated by 2008. Vivento was created in 2002 as a temporary unit so that Deutsche Telekom could transfer several thousand employees to it and avoid having to lay them off. The 7,000 Vivento employees are currently on Deutsche Telekom's payroll, but they perform duties for other companies.

The restructuring, which will cost it 3.3 billion euros ($3.9 billion), will include voluntary buyouts, layoffs, outsourcing and the reduction of full-time positions to part-time jobs. Deutsche Telekom said it would provide severance payments where needed.

Under the terms of Deutsche Telekom's collective bargaining agreement with its unions, no cuts can be made without the approval of the labor groups. The company said it has already started discussions with them.

Shares of Deutsche Telekom gained 2.5 percent to 14.87 euros ($17.86) in afternoon Frankfurt trading.

Other telecoms across Europe have looked to cutting jobs as a way to offset the effect of dropping revenue from fixed-line businesses.

The Netherlands' Royal KPN NV (search) said this spring it would cut 8,000 positions through 2010 while TeliaSonera AB said it would cut 3,000 jobs in Sweden and another 650 in Finland in its effort to rein in costs.

Deutsche Telekom is Europe's biggest telecommunications company and one of the largest worldwide. The formerly state-owned company provides landline service through its T-Com unit, counts more than 13 million customers for its T-Online Internet service and owns and operates wireless company T-Mobile.

The German government now holds about a 15 percent stake in the company, which has operations in 50 countries worldwide.