Telstra is axing 648 jobs from its ailing Sensis division, which publishes the Yellow Pages, White Pages and Trading Post.
Sensis is shedding almost 20 per cent of its 3500-strong workforce as it struggles to make the transition from print to digital publishing and make a profit in the competitive online advertising market.
It is creating 50 new jobs at a new digital customer management centre, the location of which is yet to be confirmed.
Announcing the job losses, which include 391 backroom roles and dozens of senior and middle-management positions, managing director John Allan admitted Sensis's business model was outdated.
"Our future is online and mobile, where the vast majority of search and directory business takes place," he said in a statement.
Sensis will continue publishing print editions of the Yellow Pages, a concept invented in America in 1883, and whose pre-digital slogan was "let your fingers do the walking".
But for how long remains unclear.
Publishers around the world, including media outlets, are moving to digital-only or digital-first business models, as the uptake of smartphones and tablets continues apace.
Online directories like Yellow Pages and White Pages have faced stiff competition for advertising dollars from internet giants like Google.
Telstra's financial accounts for the six months to December 31, 2012, showed Sensis's earnings fell by 69 per cent from the same period in the previous year.
Telstra's overall six-month results included a record net profit of $1.6 billion.
Most of the job losses are expected to occur in Sydney and Melbourne.
The company has 21 offices across the country, although two-thirds of its staff are in Victoria.
It said some of the axed jobs would be "outsourced", prompting speculation they'll be moved overseas.
The Community and Public Sector Union accused the company of using a "smokescreen" to send work offshore.
"It looks like (a smokescreen) because if they're offshoring jobs rather than just cutting them from the company, then it's about cutting pay and conditions and the work clearly still needs to be done," union deputy national secretary Rupert Evans told reporters in Melbourne.
Members of the Communications, Electrical and Plumbing Union (CEPU) will also be affected.
The union's assistant secretary Ken Hardisty, who received a briefing from Sensis on Thursday morning, agreed jobs may be sent overseas.
Sensis did not immediately clarify if jobs will move offshore.
Workers were alerted to the job cuts via email on Wednesday afternoon and received more details at meetings on Thursday.
Staff were said to be confused and devastated.
The CSPU was holding meetings with Sensis on Thursday afternoon.
Prime Minister Julia Gillard said it was "dreadful news".
"It's always incredibly tough when someone loses a job," she told Adelaide Radio 5AA.
Workplace Relations Minister Bill Shorten told reporters he was disappointed to hear of the job cuts.
"You are skilled people. You will find work," he said in Darwin.
"The labour market for skilled workers is still reasonably tight."
Federal opposition MPs, including workplace relations spokesman Eric Abetz and communications spokesman Malcolm Turnbull, declined to comment when contacted by AAP.