Eircom has told staff it plans to follow 400 job cuts this year with a reduction of a further 500 in the next two years.

Now owned by Australian investment fund Babcock & Brown and a worker-controlled trust that has a 35 per cent stake, the telco said yesterday it would achieve the staff reductions through a voluntary severance package and natural turnover.

The job cuts will be sought in the fixed-line division which employs 7,025. "Eircom confirms that it is to initiate a headcount reduction programme to reduce staff levels by approximately 400 by the end of 2007," the company said in a statement.

"This is an element of an ongoing restructuring programme that aims to reduce staff levels by approximately 900 over the coming three years. Staff reductions will be achieved through natural turnover and voluntary leaving."

The restructuring was part of "the continued focus to run an efficient business" that delivers greater productivity.

"It will apply to all three of the company's main divisions, including Eircom retail, Eircom wholesale/networks and the company's central services function."

The development comes as Eircom makes preparations to apply for an increase in tariffs, its first since 2004. Chief executive Rex Comb said this week that Eircom had resolved the customer service problems that led it to delay an application for a price increase earlier this year. "We haven't pushed on that button yet. I suspect it's something we'll certainly look at pretty soon. It's looking a lot better now, customer service," Mr Comb said.