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Chunghwa Telecom, the Taiwanese former state telecommunications monopoly, on Thursday announced a month-long early retirement programme in the first major step to seek the efficiencies made possible by its privatisation last summer.

The company said it aimed to shed up to 5,000 older employees by offering them generous compensation if they apply under the programme before the end of March. Chunghwa then plans to hire 2,000 younger employees at lower salaries.

After the government sold down its stake to 48 per cent last August, making Chunghwa no longer subject to budget law, the company had set the same jobs cut target - but within three years, generating annual savings of up to T$4.5bn.

Analysts said the generous early retirement programme announced on Thursday meant the company could actually reach the same goal in one step, giving it the chance to realise the savings from next year.

Staff who are above 50 years of age, have shown below-average performance or have been moved to new departments due to internal restructuring will be offered 17 months’ salary as compensation for voluntary retirement.

Other employees above 47 years of age are eligible for a payment equivalent to 12 months’ salary. Fifty per cent of the company’s workforce are aged above 47.

Under previous early retirement programmes in Taiwan, employees were normally offered seven months salary compensation at most.

“With conditions that generous, you could easily imagine 5,000 employees applying,” said Dominic Grant, an analyst at Macquarie Securities in Taipei.

Shen Fu-fu, Chunghwa’s head of investor relations, would not comment on how much the compensation payments will cost the company. But she said the programme was expected to be “almost cost-neutral”, as Chunghwa could save nine months’ salary plus bonuses per affected employee this year, and other personnel costs such as pension contributions.

Mr Grant estimated that sending 5,000 employees into early retirement under the programme would cost Chunghwa T$6bn, 13 per cent of his 2006 net profit forecast for the company. But the potential savings this year would be roughly the same, he added.

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