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Sol Trujillo plans a $56.6b technology upgrade to drive the firm's strategy shift

Telstra Corp will slash up to 12,000 jobs over five years  even as it plans to invest A$10 billion ($56.61 billion) in new internet-related technology in a shift 'to a new economic model', according to   chief executive Sol Trujillo.

The lay-offs could cut earnings by 30 per cent this year  at Australia's biggest telecommunications company.

Mr Trujillo, who replaced long-serving chief Ziggy Switkowski in July, yesterday announced the result of a four-month strategic review  that outlined sweeping changes to the company's business model.

The review includes another earnings downgrade, of as much as 30 per cent, this year and next - far in excess of the 10 per cent  forecast previously.

Mr Trujillo also announced that the third year of the company's A$1.5 billion capital-management programme would be scrapped.

While analysts welcomed aspects of the new strategy, the market remained unimpressed, with Telstra shares falling almost 7 per cent to A$4.02 after Mr Trujillo's announcement.

Telstra's stock has lost  about 17 per cent this year while the Australian Stock Exchange's main index has  gained 14 per cent.

The languishing share price continues to be a major issue for the government, which plans to sell its remaining 51.8 per cent of Telstra. Canberra has set A$5.25 as a potential share price for the sale, which could reap  A$27 billion.

Legislation to enable the sale has passed through parliament, although Senator Barnaby Joyce - a rebel government senator who threatened to vote against the bill - yesterday described as 'sneaky' the way Telstra had waited for the measure to pass before announcing the job cuts.

Mr Trujillo's strategy aims to end Telstra's reliance on its fixed-line copper network and heralds a major investment in broadband and wireless technologies, and to beef up the company's internet businesses such as Sensis, a local search engine that Mr Trujillo expected would soon rival Google in Australia.

Telstra is also aiming to have 80 per cent of its internet customers using broadband within three years, up from 50 per cent today.

Mr Trujillo also flagged the closure of Telstra's recently completed CDMA network set up to serve regional areas and its replacement with a national third-generation (3G) wireless network.

Mr Trujillo said the new business model was to adopt a 'one factory' approach where old networks were collapsed and the duplication of marketing and advertising services was minimised.

He said Telstra would cut its network platforms  by 60 per cent within three years, from about 330.

A key part of the plan involves making 12,000 jobs, or 20 per cent of Telstra's workforce, redundant over five years.

'We will not require the same number of employees and contractors as we implement the strategy because we will reduce complexity,' he said.

'With simplicity, we will be leaner,' Mr Trujillo added. 'We have barely tapped the potential of what is possible and how we can improve productivity for Australian business and increase mobility for customers.'



Telstra to axe 12,000 jobs over five years