Ministers slam Telefónica plan to cut workforce

The back-to-back announcements by former state telecoms monopoly Telefónica that it will lay off 5,600 workers, while rewarding its executives with huge bonuses, is likely to incense public opinion.

Prime Minister José Luis Rodríguez Zapatero, who is on an official trip to Asia, declined to comment on Telefónica's controversial plan to shed 20 percent of its workforce in Spain over the next three years. But one of his colleagues was more forceful.

"I disagree with it. It's impossible to put it more clearly than that," said Deputy Prime Minister Alfredo Pérez Rubalcaba, following the Cabinet meeting on Friday.

Rubalcaba's words provided backing for Labor Minister Valeriano Gómez, who on Thursday lamented news of more job cuts in a country with 4.7 million unemployed, around 20 percent of the workforce. "This is certainly not a good moment for a cuts of this size," he said.

"We know that our companies have to compete at the international level and that they have their needs," said Gómez, adding that he trusted Telefónica would negotiate with union representatives over the measures, which affect employees involved in fixed-line and internet operations.

Just a few hours after announcing the job cuts, Telefónica sent the Spanish National Securities Commission (CNMV) information about its next shareholder meeting on May 18, in which it proposes to approve incentives for senior executives worth 450 million eurosover the next few years.

The company explained that a group of around 1,900 executives will be the beneficiaries of these bonuses. If all conditions established in the reward plan are met, CEO César Alierta stands to receive company shares worth aroundseven million euros, while his top aides Julio Linares López and José María Álvarez-Pallete López could be awarded shares worth 6.5 million euros.

Telefónica on Friday also proposed paying out record dividends of 0.75 euros per share for May 6 and 0.77 euros in the second quarter, for a total payout of over 7 billion euros, a historical high for a Spanish business.

Supporters of the job cuts underscore the fact that the company's domestic business has been steadily declining for the past two years. But opponents find it unacceptable for a company with record earnings of 11 billion euroslast year to leave so many people out of a job.

Last February, during the presentation of its 2010 results, Telefónica announced several other cost-cutting measures, including a 6-percent reduction in middle-management positions. The telecoms giant hopes to grow its Latin American business units to counter lagging sales in the home market.

The company's last labor force adjustment plan (ERE) was implemented in 2003, targeting 15,000 jobs over five years. That plan was approved by then-Labor Minister Eduardo Zaplana, who was later hired as a Telefónica advisor by Alierta. Earlier, in 1999, the telecoms giant carried out another ERE affecting 10,849 workers.

On Friday morning, Telefónica also released its 2010 report on corporate governance, showing that aggregate remuneration for board members last year was 21.7 million euros, plus a further 5.9 million eurosfor sitting on the boards of other companies in the Telefónica group.