France Télécom on Tuesday said it would cut about 17,000 jobs worldwide as part of its bid to develop modern products and services that can replace decaying fixed-line telephone revenues.

The operator of the Orange mobile telephone network also announced that its net profit almost doubled in 2005 and indicated that its dividend for 2006 would increase by “at least” 20 per cent.

Its shares rose 3 per cent to reach €19.09 at Tuesday lunchtime.

The staffing reduction will be centred on France, where the majority of workers at the partly state-owned group still enjoy the security of civil servant status. In the next three years, France Télécom said it expected 22,000 of its French workers to voluntarily leave the company through early retirement and other incentives.

At the same time, the company said it will hire 6,000 new staff in France, targeting people with skills that could increase its momentum in newer services such as television delivered down telephone lines. Recruits have not been given civil servant status for several years.

Overall, Didier Lombard, chairman and chief executive, said there would be a net reduction of 17,000 in the global workforce. He said another 10,000 staff would be redeployed from background roles to customer service positions.

France Télécom is trying to cope with the dizzying pace of change in the telecommunications sector. Revenue from traditional fixed-line telephone calls is being eaten away by the increasing popularity of cheaper calls routed through broadband internet connections.

This switch was partly to blame for a sales growth warning issued by France Télécom last month. On January 11, it said sales had not grown as much as expected in 2005, an admission that caused the share price to fall 8 per cent the following day.

On Tuesday, it revealed the full picture, saying that sales were €49bn ($58.3bn) last year, an underlying increase of 2.5 per cent. This was in line with its revised guidance of 2-3 per cent growth. However, France Télécom had at one stage hoped for an increase of up to 5 per cent.

Net profit in 2005 increased from €3bn to €5.7bn, in spite of the impact of a €256m fine levied in December by France’s competition regulator, which had disciplined all three of the country’s top mobile telephone operators for collusion.

However, the comparison with 2004 was flattered by a reduction in France Télécom’s tax bill of nearly €1bn in 2005. It also benefited from a lower amortisation charge and larger disposal gains.

France Télécom confirmed that the dividend for 2005 - payable this year - would be €1 per share. The forecast for the 2006 financial year is €1.20 per share.

However, it reiterated that it had “no need” to make a major acquisition in Europe, a statement that appeared to rule out any interest in Cable & Wireless, the British group that has been the subject of takeover speculation in recent weeks.

Mr Lombard also indicated that he did not plan a share buyback programme at the moment.

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