AT&T has been bit by newer rivals

This means that nearly 7,000 more jobs are being lost than was first indicated by the company earlier this year.

The firm, squeezed by new rivals in the home calls market, continues moves away from consumer to business services.

Analysts said the latest jobs cut news was much anticipated, and AT&T's shares rose slightly in aftermarket trading.

Increased competition

The firm also said the cuts would trigger a "significant" improvement in profit margins from its consumer business for the third quarter, and that was on track for its targets for cash flow and net debt.

"In response to recent regulatory developments and a highly competitive market, we have made some tough decisions to reduce our workforce and cut costs," said AT&T chairman and chief executive Dave Dorman.

Back in July AT&T revealed an 80% profits plunge, down to $108m (�56.8m) in the second quarter of 2004, from $536m year-earlier, while revenue was 13% lower at $7.6bn.

AT&T had a monopoly grip on the US phone market until deregulation in 1984, when seven companies were split off, creating regional rivals, such as Verizon and SBC, which have gone on to eclipse AT&T in the domestic market.