WorldCom, the telecoms company that racked up massive losses and saw its executives on trial for fraud, will cut almost a tenth of its workforce as part of a massive cost-cutting drive.

The company filed for bankruptcy in July after admitting to a $9bn accounting scandal, and later hired former Compaq CEO Michael Capellas to lead it.

Now Mr Capellas' drive to return the company to solvency will cost 5,000 corporate and administrative jobs, 8% of its 60,000 total headcount, along with cuts to general expenses of 13%.

At the same time, it is cutting the fees it pays local phone companies to terminate calls it carries across its long-distance network by 12.5%.

Slippage

The move follows last week's decision to take a charge of almost $32bn to wipe off the excess value of plant and equipment.

The company employs around 2,000 people at its Europe, Middle East and Africa (EMEA) headquarters in Reading.

The company also announced it would target small and medium-sized businesses, after revenue from its predominantly large corporate customers fell from $2.3bn in October to $2.2bn in November.

"There's a problem: (large-scale customers) don't feel comfortable with WorldCom," Dean Faust of the magazine Business Week told the BBC World Service's World Business Report.

"The company has to file regular reports with the bankruptcy court every month, and those reports show a continued deterioration in its revenues. Customers are defecting."

Way to go

WorldCom is far from out of the woods, and the tone of the present cutbacks is dictated by the way it got itself into the accounting mess in the first place.

WorldCom grew in less than two decades from a backwoods communications services vendor into a world-bestriding telecoms giant by buying other companies, using its rapidly-appreciating shares as currency.

The result of the thousands of acquisitions is a hotch-potch of staffing and systems, some largely incompatible.

Some analysts believe this has hurt WorldCom's customer service, as well as raising costs.

And once technology share prices started slipping, the creative accounting to paper over the cracks became impossible to hide.

Doubled up

Now, the duplications and overlaps need to be tackled, Mr Capellas said in a memo to employees.

"WorldCom acquired many companies quickly," he said.

"Due to a lack of integration planning and discipline, there is tremendous overlap within the company, especially in the areas of corporate and administrative functions."

The move was welcomed by observers, but with warnings attached.

"He's taking a big risk cutting that many jobs that quickly, and making cuts that rely on the integration of the systems," said Berge Ayvasian, from the Yankee Group.

"These things may take more time than that."