AOL Plans 5,000 Job Cuts As It Stops Charging for Services

The American internet service provider AOL plans to shed 5,000 employees, amounting to almost a quarter of its global workforce, as it goes through a radical restructuring intended to reinvent the business in the face of falling subscribers.

AOL's parent company, Time Warner, is taking drastic action to turn the business around and announced this week that it would be making features such as email and instant messaging free.

In a statement, the company disclosed the scope of the job losses involved in the overhaul: "At a company meeting this morning, Jon Miller [AOL's chief executive] told AOL's worldwide workforce of 19,000 people that within six months, it was likely that around 5,000 employees would no longer be with the company."

AOL gave no details of which departments would bear the brunt of the departures, although it is in the process of selling its European internet access businesses, which operate in Britain, France and Germany and employ about 3,000 people. Other reductions are likely to be made as AOL stops actively marketing its dial-up internet access in the US to concentrate on broadband. This will reduce the need for customer service centres and for technical support.

AOL's new direction will mean restructuring charges of $350m (£185m) by the end of 2007. The company has said it intends to cut $1bn of operating expenses by the end of next year.

Once regarded as being at the cutting edge of online access, AOL has struggled to keep up with competitors and its subscriber base has fallen from 26.7m to 17.7m over the last four years. It has especially struggled as internet users migrate to broadband. By offering features such as "aol.com" email addresses free, AOL hopes to attract more users and hence more advertising.