Finnish telecoms equipment maker Nokia Oyj (NOKIA.HE) plans to cut 1,233 jobs at its French subsidiary Alcatel-Lucent International, equivalent to a third of the unit’s workforce, the group said on Monday.
The announcement, just as Europe prepares for the deployment of the next generation of mobile internet, or 5G, has political resonance in France because Nokia bought the unit five years ago on condition it would keep jobs.
Nokia, which competes with Ericsson (ERICb.ST) and Huawei [HWT.UL] for 5G networks, said in a statement the staff reduction was needed because of significant cost pressures.
Nokia said in April it aimed to cut costs by 500 million euros ($560.30 million) by the end of this year compared with full-year 2018, with 350 million euros targeted to come from operating expenses and 150 million from sales costs.
When Nokia bought Alcatel-Lucent International, it pledged to preserve jobs in France for two years and to expand research and development teams in the country to create a resource within the group for 5G technology.
The French research and development teams are particularly affected by the job cuts.
“Nokia must improve this job cuts plan really significantly,” an official at the French finance ministry official said on condition of anonymity.
Nokia became free from the commitments it made this month, a spokeswoman said, while the company’s president in France said Nokia would still be a big source of jobs.
“Nokia will continue to be a major employer in France with a strong foothold in R&D, sales and services, which will enable us to develop and execute our customers’ projects efficiently,” Thierry Boisnon, president of Nokia in France, said in written comments.
Nokia employs 5,138 people in France, of which 3,640 work for Alcatel-Lucent International.
The entity was part of the Alcatel-Lucent group before Nokia bought it in 2015 in an all-share deal that valued the French business at 15.6 billion euros.
The merger was scrutinised by the French government and its then economy minister Emmanuel Macron, who is now president.
“It’s just a low-cost strategy that is being implemented, contrary to all the commitments made by Nokia in France. Nokia is laughing at everyone, first and foremost the French government,” the CFE-CGC union at Nokia said on its website.