Australia's largest telco also has flagged a bigger than expected decline in earnings this financial year.
Telstra chief executive, Sol Trujillo, said the company had to act to quickly to meet the challenges posed by a market where fixed line revenues are falling and mobile markets reach saturation point.
He said Telstra could no longer rely on its fixed line copper network to provide the bulk of its revenues, as it had in the past, as new technologies overtake the network and Australians move closer to a wireless world.
"We have barely tapped the potential of what is possible and how we can improve productivity for Australian business and increase mobility for customers," he told an analysts' briefing.
Telstra has targeted as many as 10,000 to 12,000 job cuts over
the next five years.
Mr Trujillo said " ... we will not require the same number of employees and
contractors as we implement the strategy because we will reduce complexity," he said. "With simplicity we can be leaner," he said.
Job loss reaction
Community and Public Sector Union (CPSU) assistant national secretary, Stephen Jones, called on the federal government to intervene and stop the job cuts, saying they were an "outrageous attack" on Telstra workers.
"We don't see how they can continue to provide the services that Australians are currently expecting from Telstra by slashing that number of jobs out of the company," he said.
"If this is the price of privatisation then the price is too high for Australians to be expected to pay."
Opposition leader, Kim Beazley, described the planned axing of up to 12-thousand jobs at Telstra as a taste of things to come.
He said Labor always predicted the privatisation of Telstra would lead to job losses.
Mr Beazley claimed workers who lost their jobs would find it harder to find and keep new ones under the Howard government's proposed industrial relations changes.
However Prime Minister, John Howard, said Telstra workers who face job loss during the next five years have a good chance of finding a new job because the economy is strong.