France Telecom

France Telecom, Europe's second- biggest phone company, plans to eliminate as many as 23,000 jobs over three years as profitability declines. The job cuts will come mostly from attrition in France and they represent 11 percent of the 203,000-strong workforce. The net number of jobs lost will be 17,000 people, as 6,000 employees will also be hired.

Shares of France Telecom rose by 3 percent to close at 19.16 euros in Paris, the biggest rise in more than two months. Before today, the stock had lost 23 percent in the past year, compared with a 23 percent gain in the benchmark CAC-40 Index. Second-half net income rose 19 percent to $2.8 billion, beating analysts' estimates.

However, France Telecom forecast profitability is due to drop as consumers switch to cheaper calls via Web services, known as voice-over Internet protocol. The company predicts about 40 percent of the French fixed-line retail market will move to Web calls this year, from about 15 percent in 2005. The company expects the gross operating margin to drop 1 percentage point to 2 percentage point this year because of increased marketing spending in the U.K. and as customers switch to Internet calls.

Therefore, France Telecom has to slash costs and speed up its transformation to help counter the impact from people moving to VoIP.