Mr Breton is a turnaround specialist

The company, which remains state-controlled, owes about 70bn euros (�46.8bn; $75.7bn) as a result of a massive acquisition drive during the 1990s.

Labour unions believe that the French job losses are only the start, and that the firm could end up sacking up to one in ten of its workforce - about 13,000 people worldwide - in the coming months as it tries to balance its books.

But at the same time as announcing the layoffs, chief executive Thierry Breton told investors that they could expect a "good surprise" when the firm's performance for the final three months of 2002 is unveiled on 5 March.

Helping hand

Mr Breton took over the top job four months ago, and promptly negotiated a 9bn euro loan from the French government to help it deal with its debt.

You can expect Sol Trujillo to take Orange from ... a traditional voice wireless company to the cutting edge of wireless Jeff Kagan Telecoms analyst

The money has come from ERAP, a state holding company, which is to take over the state's stake.

In return, France Telecom has promised to dig into its 15bn euro cash pile and raise money from the financial markets to pay back its loans.

But despite the carefully-designed structure, the loan is being investigated by the European Commission, which suspects it may qualify as unfair state aid, skewing the market against private competitors.

In and out

Job losses were not the only big news from Mr Breton.

Orange, the mobile phone company France Telecom bought in 2000 is to get a new chief executive, Mr Breton said - as well as losing one of its founders after 11 years with the firm.

The surprise announcement gives the top job to 51-year-old Sol Trujillo, a veteran of the US telecoms business and an Orange boardmember, replacing Jean-Francois Pontal after his retirement on 3 March.

Mr Trujillo has a reputation as an innovator who brought high-speed Internet services to his largely rural customers while CEO of US West a, the local carrier in 17 US states, said Atlanta-based analyst Jeff Kagan.

"You can expect him to take Orange from the realm of a traditional voice wireless company to the cutting edge of wireless, with data and wireless messaging, streaming audio and video," Mr Kagan said.

At the same time, deputy chief executive Graham Howe - who helped found Orange a decade ago but has now twice been passed over for promotion - announced he was leaving.

And UK-based finance director Simon Duffy is also stepping down.