By Sean Carney

PRAGUE--Czech Telefonica AS (BAATELEC.PR) plans to cut 10% of its staff this year in a move primarily aimed at shuttering business units that aren't profitable and shouldn't impact any customer-care units or competitiveness, the company's spokesman said Monday.

"Our goal is primarily about reducing activities that are not profitable and to not harm any customer experience across the whole company," Hany Farghali said. There will be no cuts to positions in customer care units, he added.

The company is majority-owned by Spain's Telefonica SA (TEF) and has been suffering steady declines in revenue in the voice and fixed-line segments in recent years as smart phones and other web-based applications pare customers away from the one-time incumbent operator.

Ctirad Volek, head of personnel at the company, said the cuts are to center on units that are unlikely to become profitable.

"It's not a secret that our telecommunications market is changing and we must react, and this is part of that reaction," Mr. Volek said.

"For a long time we've been looking for synergies and reshaping processes, and we're stopping non-profitable activities," he added.

However the company is still profitable and is buying back some of its stock from the market, it also has a dividend policy that pays out both a part of net profits and a part of accumulated profits from previous years.

The company has roughly 5,900 employees in the Czech Republic and this year will cut about 500 jobs as part of the ongoing restructuring plan adopted in 2010, Mr. Farghali said.

While a staff reduction was expected, the scope of the cut is surprising, said Josef Nemy, analyst at Komercni Banka. "We expected only half the amount of job cuts," he said, adding that the sharp headcount reduction will improve profitability but added it could make it uncompetitive in the long-term.

Telefonica's Mr. Farghali refuted such assertions, saying the move will benefit the company's competitiveness by allowing it to shed loss-making units and focus on areas that support the bottom line.

The cuts and their impact on the company's net earnings and dividend policy haven't yet been announced but should be publicized once the supervisory board has voted on the measures, which could be in about a month, said Mr. Farghali.

At 1335 GMT the company's stock was trading at 329 koruna ($17.1), down 0.3% on the day, a smaller decline than the overall lower market in Prague, which is down 1.4% on the day.

Write to Sean Carney at sean.carney@dowjones.com

Go to http://blogs.wsj.com/emergingeurope/ for the new Dow Jones blog on Central and Eastern Europe, covering business, politics, society and more, written by our correspondents across the region.

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