The second- largest phone company of Europe, Telefonica SA has announced to cut 6,500 jobs in Spain. The announcement was made by the company after it reached a contract with labor unions on a new collective bargaining agreement through 2013. The company has revealed to slash down 20% of its employees in Spain over the next three years.

The job cuts are a part of company’s new strategy to improve profitability at its Spanish division. The workers, which will be laid down by the company would be liable to get unemployment benefits for up to two years.

Europe’s second largest phone company, Telefonica SA, announced a drop of 0.6 percent in its profit in the third quarter due to Spanish recession in last six decades.

In a regulatory filing, Madrid based Telefonica said that net income has decreased to 1.99 billion euros ($2.98 billion) from 2 billion euros one year before, and the sales have fallen by 5.7 percent to 14.13 billion euros.

Mr. Cesar Alierta, Chief Executive Officer of Telefonica, agreed to spend 3.6 billion euros for buying companies in Brazil and Germany, in order to increase growth outside the Spain.