Thames Water has said it plans to cut up to 25% of its workforce under an efficiency drive that could see 300 posts axed every year up to 2010.
The company said compulsory redundancies will be kept to a minimum and voluntary cutbacks will be considered.
The GMB union said it would seek to ensure that no front-line jobs were lost and that investment continued despite the huge cutback.
Thames, owned by German utility giant RWE, has been criticised for failing to stem leakages during this summer's heatwave.
Chief executive Jeremy Pelczer said in an email to staff: "Any business has to be more efficient than its competitors in order to secure a long-term future.
"I have to guard against any complacency, towards customer service or efficiency, that may arise because we are a monopoly.
"As we seek to drive the efficiencies needed to meet our goals, some of them will come through smarter procurement but some will come from different ways of working which will involve job cuts.
"This may lead to a head count reduction of up to 25% by early 2010. To put that in context, it would mean an average of around 300 people per year."
Mr Pelczer said the number was subject to revision as Thames Water's efficiency review continued.
