Telecom Italia to cut 5,000 jobs, have higher costs in '08

Telecom Italia on Wednesday said it will cut 5,000 jobs through 2010, a move that will increase costs this year to yield savings of €300 million a year once the job reduction is complete, according to a Retuers report.

The Reuters report said the operator plans to spend €350 million this year, €250 million more than forecast in March, to cut staff.

'They will mainly impact 2008 results and the relative targets announced in March and will be more than offset by savings expected in the next two years,' Telecom Italia said in a statement.

On March 7 Telecom Italia said it was targeting 1-2% a year revenue growth between 2008-2010 and earnings before interest, tax, depreciation and amortization (EBITDA) of 39% of revenues.

Telecom Italia has about 83,400 employees according to Reuters data.

The former monopoly also said it created a Domestic Market Operations Division integrating its fixed, mobile and top clients structures.

The new unit, to be headed by Oscar Cicchetti, will focus on customer segments rather than on mobile or fixed-lined clients. Integrating marketing, sales and field service operations will allow Telecom Italia to save money and be more competitive, it said.

Chief executive Franco Bernabe, named in December, has promised more efficiency and better customer care to stem a decline in profits.

He is struggling with a mountain of debt. The result of three leveraged buyouts in 10 years, the debt pile of more than €35 billion towers over Telecom Italia's market capitalization of €25 billion.

Bernabe has put the French broadband unit, Alice, on sale but he has little else to cede.

Previous management already sold businesses across Europe and Latin America to finance the debt and pay dividends, reducing a global company to an Italian company with large mobile phone operations in Brazil and a broadband unit in Germany.

The job cuts show he needs to change Telecom Italia to face stiffening competition in Italy as broadband companies such as Fastweb, taken over by Swisscom last year, win a greater share of business.

While Telecom Italia failed to stem its decline, other large European former monopolies such as France Telecom and Deutsche Telekom have been able to hold the line or increase sales even in mature markets in western Europe.

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