O2 is to axe 500 jobs as part of a major restructuring of its business. The mobilephoneco wants to replace back office workers tied up with managerial and admin tasks and replace them with 2,000 workers dealing directly with punters.

It also plans to open a fourth call centre and expand its network of shops.

The job losses are expected to be made later this year and cost the company between £40m-£45m. Once done, though, it should help deliver an "enhanced customer experience and strengthen customer loyalty".

Which means that the mobile outfit will spend more time chatting up its punters so they won't up sticks and switch allegiance to one of the discount mobile operators - such as easyMobile - currently making a big noise in the market.

Or as chief exec Peter Erskine puts it: "By delivering an enhanced customer experience, and strengthening customer loyalty, we aim to improve customer retention and reduce churn, to create a sustainable basis for enhanced long-term returns."

Publishing a trading update today O2 reported that net service revenue growth in the UK for 04/05 is expected to be somewhere between 2-15 per cent. Slower growth in the second half of the year was due to a cut in termination rates, the loss of a key BT contract and increased competitiveness among rival operators.

Looking ahead, it reckons that revenue in the UK will experience "mid-single digit growth".

By mid afternoon shares in O2 were down 4.5p (3.6 per cent) at 118.5p. ®

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