Telecom Italia said it would be submitting plans for a formal redundancy program to trade union representatives and government authorities after failing to reach agreement with unions on personnel changes resulting from its digitization efforts.

The company has now asked the government to approve a temporary layoff scheme for 4,000 workers, or nearly 7% of its current workforce, according to a report from Reuters.

The Reuters report, which cites a source close to the matter, says employees would stay at home for a certain period under such a temporary layoff scheme, while Telecom Italia works on adjusting employment levels to suit its strategy.

Telecom Italia (TIM) had been looking to cut up to 7,500 jobs in Italy through voluntary redundancies and early retirement, union sources told Reuters.

A spokesperson for Telecom Italia told Light Reading that unions had rejected proposals including early retirement for some employees and incentives for others to "exit" the business. "We are not talking about layoffs," said the spokesperson in reply to queries about headcount reductions.

The Telecom Italia statement and government report came hours after the Italian phone incumbent reported a year-on-year sales decline for the first three months of the year because of setbacks at its international wholesale business and foreign exchange effects. Overall revenues fell 1.6%, to around €4.7 billion ($5.6 billion), but were up 1.7% in Italy, which accounts for about 78% of total sales.

Earnings (before interest, tax, depreciation and amortization) were hit by financial penalties after government authorities said Telecom Italia had failed to correctly indicate that French media conglomerate Vivendi had taken effective control of the company last year. Overall EBITDA shrank 4.9%, to about €1.9 billion ($2.2 billion). It would have risen 1.8% but for the fine and other "inorganic" effects, said Telecom Italia.

Following a shareholder battle, Vivendi, which owns about one quarter of Telecom Italia's shares, recently appeared to lose control of the boardroom to Elliott, a US hedge fund that has built a stake of about 9% in the business.

While Telecom Italia has not published targets for a headcount reduction, its statement about union discussions is a tacit admission that DigiTIM, its digitization and automation program, will claim jobs in the next few years.

The operator said it had been in discussions since January to "define a personnel plan in line with the announced purposes and targets" of DigiTIM.

"Despite the numerous opportunities for joint in-depth analysis and the company's openness to a constructive and decisive discussion, it has not been possible to reach a joint solution fit for the company's transformation challenges; these are unavoidable in order to respond effectively to the technological and manufacturing changes imposed by the market," said Telecom Italia in a statement.

"The need to safeguard the industrial objectives, together with the economic and organizational sustainability requirements of the employment levels, therefore make Telecom Italia's submission of a project for an extraordinary redundancy fund for company reorganization to the Ministry of Labor and trade union representatives inevitable," it added.

Telecom Italia's spokesperson said the operator could implement an extraordinary redundancy fund without union agreement under Italian law. Submission of the request to the Ministry of Labor would trigger another 25-day period of further negotiations. "Our wish is to find a shared solution with the unions," said the spokesperson.

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An efficiency drive at the operator claimed 1,800 jobs last year, or nearly 3% of the operator's workforce, leaving it with 59,429 employees in total. Numbers crept up to 59,489 in the first three months of this year, however.

In a strategic plan published in early March, Telecom Italia said that its DigiTIM targets were to get 85% of customers using self-care apps and reduce "human-operated interactions" by 30%. It also aims for a turnaround at the struggling wholesale business through investment in automation and digital tools. (See Telecom Italia Molders as Shareholders Feud.)

Telecom Italia struck a partnership on artificial intelligence with US software giant Microsoft in April, indicating that Microsoft's technology would be used to develop "chatbots" and make other improvements to customer care and technical assistance. (See Telecom Italia's AI Tie-Up With Microsoft May Bring Job Cuts.)

Chatbots are software-based systems that are able to communicate with customers more effectively than humans, according to their supporters.

While there is widespread concern about the impact of automation on jobs in the telecom sector, some companies continue to insist that redundancies are not the main goal of automation initiatives.

The UK's Vodafone Group plc (NYSE: VOD), which is also prioritizing automation, told Light Reading earlier this week that investment in chatbots would change the nature of the job for a customer service assistant, and lead to service improvements, without necessarily triggering massive layoffs. (See Vodafone Prioritizes Automation as Efficiency Bolsters Margins.)

Vodafone saw little change in headcount in the fiscal year ending in March 2017, when it had about 111,600 employees on its books, but has yet to reveal details of workforce numbers for the recent fiscal year.

— Iain Morris, International Editor, Light Reading