Spain's Telefonica said it has agreed a plan with unions to cut up to 6,500 workers over the next three years, about 20 percent of its domestic workforce.

Telefonica said it would foot the bill for the staff cuts, but did not put a price tag on the plan, which unions have said would cost 2.6 billion euros ($3.8 billion).

Separate from that sum would be Telefonica's share of unemployment benefit, as requested by the Spanish government and which sources familiar with the negotiations say Telefonica is prepared to take on.

The telecommunications company is reining in costs in Spain due to tough competition in the country's stagnant economy.

(Reporting by Tracy Rucinski; Editing by Will Waterman)

($1 = 0.689 Euros)