The Winnipeg-based company says 100 employees have already left and a further 400 have been notified they'll be leaving the business in 2015 or 2016.
Manitoba Telecom says it's also cutting Allstream's capital budget by 20 to 30 per cent and reducing the parent company's dividend to shareholders.
The cuts follow a sweeping strategic review launched in February by Jay Forbes, who became CEO of the telecom in January.
Allstream provides telecom services to large Canadian companies and multinational organizations operating in Canada — competing against companies such as Bell Canada (TSX:BCE) and Telus (TSX:T), among others.
Manitoba Telecom had attempted to sell Allstream in 2013 but the $520-million deal was blocked by Ottawa.
— Follow @DavidPaddon on Twitter.
Note to readers: This is a corrected story: A previous version incorrectly said Jay Forbes was president as well as CEO