German telecommunications giant Deutsche Telekom said on Wednesday that it would shed 32,000 workers, most of them in fixed-line telephony, over the next three years as part of a comprehensive restructuring.
The cuts are intended to restore Telekom's earnings
Tough competition in the telecommunications sector and a need to cut costs prompted Deutsche Telekom to move ahead with its restructuring plan.
"The rapid pace of technological development and the tough competitive environment in the fixed network and broadband sector in Germany have intensified the challenges we're facing," said chairman Kai-Uwe Ricke.
Kai-Uwe Ricke, CEO of Deutsche Telekom AG
"We have to cut jobs in old core markets," Ricke said. "At the same time, there are opportunities to create jobs in new innovative markets."
As part of a "comprehensive staff restructuring, a total 32,000 employees will leave the group within the next three years," Deutsche Telekom said.
Most of the jobs would be axed in the group's fixed networks division T-Com, which employs a total workforce of 107,700.
Telekom plans to hire 6,000 workers in its fiber-optics operations, and find new jobs for about 7,000 people through the company's in-house Vivento employment agency, resulting in a net effect of 19,000 jobs -- 8 percent of the total workforce -- lost through the restructuring.
The company has axed an average 10,000 jobs each year since it went public in 1995.
Nevertheless, in the short term "there will be no compulsory redundancies," it said, adding that "the cost of the entire program will be 3.3 billion euros ($3.96 billion)."
"Job cuts will be made via voluntary measures, such as old-age part-time work and severance payments," Deutsche Telekom said.
Telekom's fixed-line unit has had two years of shrinking revenue
Since Deutsche Telekom was formerly a state-owned monopoly, many of its employees have civil-servant status and can't be fired, meaning that special negotiations with the government would have to be held regarding early retirement programs for those employees, it said.
Investors were cheered by the news of the drastic streamlining of Deutsche Telekom's workforce.
In afternoon trading on the Frankfurt stock exchange, Deutsche Telekom shares were showing a gain of 0.41 euros or 2.83 percent at 14.91 euros after earlier hitting an intraday high of 14.96 euros.