Eircom is to cut 1,200 jobs and freeze basic pay for two years under a major restructuring plan agreed with unions, the company has announced.
In a statement, Eircom said it had "reached an accord" with union representatives on the first stage of the reorganisation programme.
The agreement includes a group-wide freeze on base pay for two years until June 2011, reductions of about 25 per cent for certain staff allowances such as subsistence and mileage and the elimination of "other traditional arrangements".
The company said there will also be no performance-related annual bonus payments this year and for the next two years.
"This will be reviewed at the end of the financial results June 30th 2010. Other performance related bonus/commission payments are also under review."
Staff numbers, including permanent and contract staff, will be cut by 1,200 by June 30th 2011.
Eircom currently has a staff of about 7,500. It is struggling with a debt burden of about €3.8 billion.
Workers were told of the deal today following weeks of talks with trade unions.
Last month, the Communications Workers' Union said it would resist compulsory redundancies, but that it was willing to work with the company to find ways of restructuring the business.
Eircom said further engagement on additional cost-saving measures will commence immediately.
It is seeking cost savings of €130 million per annum by 2010/2011. A second stage of cost reductions have a target completion date of July 1st this year, the statement said.
Stage two cost reductions have a target completion date of 1st July 2009.
Acting group chief executive Cathal Magee said, “The company and the union representatives have demonstrated the willingness to make difficult but necessary decisions to ensure the long term competitiveness of eircom. Today’s announcement is an important first step.
"Management recognises the very significant impact of the current economic environment and is committed to securing far reaching cost reductions, and an overall vision and strategy framework for the business.”
Labour Party communications spokeswoman Liz McManus said the company had already been "pared to the bone" and it was "difficult to see how it could cut 1,200 workers without reducing services further".
"I strong believe that the country's communications needs will now be best served by the nationalisation of Eircom. Nationalisation will not solve all of Eircom's problems, but it could be a vital first step to dealing with the broadband deficit," she said.
"What we need to do is establish Eircom as a public-interest company. Eircom is part of a high-tech industry, and must be capable of responding to rapidly changing commercial and technological trends. Since it was privatised, Eircom has not invested in broadband infrastructure, and Ireland has fallen further and further down the broadband league. What is required is an ownership structure which combines commercial agility with a strong public interest mandate."