France Telecom job cuts hoped to kick-start privatization

14,500 to go during 2004

France Telecom is to shed 7% of its global workforce as part of its restructuring plans, helping the French government to kick-start its stalled privatization program. The carrier remains some way behind its European rivals in efficiency terms but its management team continues to make progress.

The carrier is to lose 14,500 jobs during 2004, but insists the cuts will come about through early retirement and reassignment to other branches of the state civil service, rather than lay-offs. The cuts would move the operator close to its goal of cutting 22,000 French employees between 2003 and 2005.

At the end of 2003, France Telecom employed approximately 216,000 people (126,000 in France and 90,000 abroad). It expects this figure to shrink to about 202,500 by the end of this year.

Union representatives said they were concerned about the effects of the job losses. "It's going to lead to chaos in our services, and we're going to lose skills," said Jacques Lemercier, head of the communications workers' arm of the Force Ouvriere union.

The cuts are part of France Telecom's attempts to gain operating efficiency, as the French government looks to restart its stalled privatization program. The French government's 56% stake in the company, which has a market capitalization of E56 billion, is by far the most valuable of the government's liquid holdings.

By law, the French government's stake must remain above 50%, but a new law that took effect this month removed the government's obligation to maintain a controlling stake in the one-time national telephone monopoly.

It is widely expected that the French government will sell a significant part of its holding in coming months. Unfortunately, the French operator still has some way to go before it can match the operating efficiency of some of its European competitors. In 2002, France Telecom was nearing collapse after a spending spree left it facing a huge debt pile of E68 billion.

However, a combination of new management, a highly controversial cash injection of E9 billion by the French government, and a restructuring program, has helped put the carrier on the road to recovery. France Telecom is currently saddled with a debt burden totaling E49 billion.

Source: ComputerWire/Datamonitor

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