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O2 could axe as many as 200 jobs from its IT division following the announcement last week it will cut 500 positions from the mobile phone business. Insiders claim the compulsory job losses will be split evenly between O2 employees and contract staff.

Last week O2 announced plans to restructure its business by elbowing 500 back office staff while creating 2,000 customer-facing positions. The job losses are expected to be made later this year and cost the company between £40m-£45m. Once done, 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."

But it's emerged that up to 200 of the 500 jobs losses could be from the mobilephoneco's IT operation. One insider told us: "Yes, O2 will have more care agents on the phones to talk to the customers, but there will be less IT people to keep the systems running."

A spokesman for O2 declined to comment on the specific details of the redundancy plans but told The Register: "We are at the very early stages of consultation and nothing is final yet. We will not do anything to risk our major IT projects."

A "shocked and dismayed" Communications Workers Union (CWU) has already promised the "strongest possible" response if O2 announces compulsory redundancies as part of the 500 job losses. ®

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