Magyar Telekom will lay off 400 workers at a cost of about 7 billion forints ($37.04 million) in severance payments, the brunt of which it expects to incur in the fourth quarter, the company said on Wednesday.

The company, a unit of Deutsche Telekom, said on top of these layoffs, further job cuts would come from the loss of some executives and workers retiring.

It said the decision would result in annual savings of 6.5 billion forints compared to 2008 levels, when Total Workforce Management (TWM) costs totalled 121 billion forints, excluding severance payments.

Our goal is to reduce our Total Workforce Management (TWM) related costs by HUF 6.5 billion compared to the 2008 level excluding severance expenses, which represents a reduction of more than 5 percent over the two year period, it said.

It said the system allowed it to reduce personnel costs despite annual wage increases this year and next.

Magyar Telekom said it would publish the exact numbers and costs of the job cuts at the end of the year.

At 1336 GMT, Magyar Telekom stock traded up 0.9 percent at 800 forints on the Budapest Stock Exchange, underperforming a 3.2 percent gain in the wider market .BUX.

($1=188.93 Hungarian Forint)

(Reporting by Gergely Szakacs; editing by Simon Jessop and Elaine Hardcastle)