France Telecom to slash workforce by 14,500

France Telecom announced details of a radical restructuring yesterday that will see 14,500 jobs disappear at the French state-controlled telecoms business.

Like many companies in the sector, France Telecom is coming to terms with the legacy of its debt-fuelled expansion which saw it acquire businesses such as the mobile phone group Orange, for €40bn (£28bn) in May 2000.

Thierry Breton, the chief executive, announced shortly after his arrival at the end of 2002 that the company would have to shed 22,000 jobs over three years to reshape the business and help conserve cash. It has €49.3bn (£34bn) of debt on its balance sheet. Yesterday, the company told unions of the details of the latest part of its restructuring. Of the 14,500 jobs on the block, 8,800 would go in France, with the lion's share of the rest being axed in Poland, where France Telecom owns 47 per cent of TPSA, the Polish telecoms carrier.

France Telecom said all the jobs would be cut through natural wastage and early retirement and that it did not plan any compulsory redundancies. The job losses do not affect the company's operations in the UK, notably Orange.

A large part of the job losses in France will result from French civil service employees being moved out of the state-controlled telecoms company back into jobs in other areas of the French civil service. These people have tended to hold jobs at the company in areas such as human resources and finance.

The French government still owns a 53.3 per cent stake in France Telecom and the business has been burdened historically by a strong civil service culture and the legacy of being a nationalised industry.

France Telecom suffered more than others by making big acquisitions in the boom with cash as opposed to shares, as most other telecoms groups were able to do. This was because historically the French government was unwilling to dilute its majority shareholding by issuing new shares to fund deals, relying instead on the debt markets to pay for expansion.

Although the company plans to shrink its total head count in net terms, it will continue to recruit. Last year it took on 700 people and this year it plans to recruit 1,400 new staff.

Bankers now hope that the French government will take advantage of the continuing improvement in stock market sentiment and look to offload some or all of its remaining stake in France Telecom, which is valued at about £21bn.