France Telecom has confirmed plans to cut 20,000 jobs over the next three years, as the French government plans a massive loan to the company.
The telco intends to cut nearly 10 per cent of its workforce through natural wastage and early retirement.
But according to the Financial Times, French union leaders fear that the latest cost-cutting exercise will see up to 20 per cent of staff made redundant as the company tries to contend with £45bn of debts accumulated buying 3G licences and mobile operator Orange.
New chairman Thierry Breton will this Thursday sketch out plans for a €9bn (£6bn) injection of money from the French government in the form of a 'shareholder' loan.
The government already owns 56 per cent of France Telecom and, to circumvent European Union rules regarding state aid, will hand over its shares to a separate body.
This body will in turn make the state-backed loan allowing France Telecom an easier time in raising another €6bn (£4bn) from the money markets.
France Telecom should then be able to repay the loan by selling shares to the public. However, the EU may still thwart these plans if it believes that the telco would benefit from an unfair subsidy on the back of the state guarantee.
The company has also settled a deal to buy back €6.1bn (£4bn) in loans granted to German mobile phone operator MobilCom.
France Telecom said in a statement that the arrangement would cover loans to banks as well as Nokia and Ericsson, which supplied equipment to the company.
The deal should allow a rescue plan for the mobile operator to begin in the near future.
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