Vodafone will cut 11,000 positions over the next three years, as its new CEO tries to turnaround the struggling telecoms company.
This is the biggest round of reductions in Vodafone’s history, and it amounts to approximately 12 percent of its 90,000 employees worldwide. Most of the cuts will be made in Europe.
Vodafone has already taken action in Germany and Italy, where it has already cut 2,300 jobs.
Margherita Della Vale, Vodafone’s former finance chief who was promoted to CEO last month, replacing Nick Read, stated that the cuts will help release about EUR250m a year, and simplify the group. She warned that there is “no easy fix”.
She refused to elaborate on where the cuts will come from, but said that additional roles would be removed at its Paddington global headquarters. Vodafone has an office in Newbury, UK and employs around 9,000 people.
“We needed to speed up executions and speed our time to market by eliminating these layers of supervision in which the decision-making was bounced around between the markets, the HQ and it was unclear as to who owned which decision.”
Della Valle 58, who outlined her plans to revive Vodafone in the face of weaker than expected full-year results said that Vodafone’s performance was “not good enough” and it “must be changed”.
Della Valle has been working at Vodafone for nearly 30 years. She said that she would simplify Vodafone and reduce its complexity. She said that she would concentrate on growing Vodafone Business in order to make it the “best telco for businesses” in Europe and Africa.
She stated that “the steps taken in the past few years were probably too incremental. We need to be deeper and faster”, and promised to continue making “substantive changes”.
What I want most is that our markets are empowered and focused on customers.
She said she was more qualified than an outsider for turning around Vodafone because she has a “very specific view of what we need to change… We can’t wait.”
Vodafone is one the largest telecoms companies in the world, offering mobile, broadband, and TV services. In a market that is highly competitive and has large debts, it has struggled to grow. Vodafone announced Read’s departure as CEO in December, after the share price of the company had dropped by 44 percent since Read took over four years ago.
Della Valle stated that Vodafone must “get back to the basics” in consumer connectivity, delivering an “easy and predictable” customer experience.
Vodafone plans to turn around Germany, the largest market in the group, which has been struggling since the EUR18,4 billion purchase of cable assets by Liberty Global in 2018. It also wants to conduct a strategic review for Spain, a country she described as “subscale”.
Della Valle stated that Vodafone’s performance “has simply not been good” in Germany.
In Germany, service revenue fell by 1,6% in the period ending March because of the loss of broadband customers.
The Group’s revenue increased by 0.3% to EUR45.7 Billion, with growth in Africa offset by a decline in European service revenues including Italy and Spain.
The company’s adjusted earnings fell by 1.3 percent to EUR14.7 Billion, which was below its guidance.
The London Stock Exchange saw Vodafone shares fall 4 per cent, to 86 1/2p, reflecting the company’s cashflow guidance of EUR3.3 billion. This is 8 per cent less than what City analysts expected.
She said that the primary reason was due to the timing of payments in Germany for cable television, which has changed as a result of a new law. “Importantly,” she added, “our new EUR3.3 billion position of free cash flow is a foundation from which we intend to sustainably expand.”
Vodafone’s leverage has dropped to 2.5 times its earnings. She said that “any concerns we had about our debt level are now behind us”. The dividend was also held at 9 euro cents.
Vodafone has been able to attract several strategic overseas investors in the last few months. It is now looking to consolidate on a number European markets to help boost its stagnant growth, return of investment and share value.
These include long-term, late-stage discussions with Three UK about a possible merger in Britain.
Della Valle stated that negotiations with CK Hutchison (the Hong Kong holding company which owns Three) “will take as much time as necessary to get a fair deal”.
“The UK must accelerate its 5G rollout. Number three and number four on the market, we lack the scale or returns to properly invest. The UK will benefit from a new competitor after the transaction.
It agreed a partnership last week with Emirates Telecommunications Group (e&), a UAE based telecoms firm and its biggest shareholder. Vodafone has appointed the chief executive of e& to its board. The two companies are looking at combining services, technology and infrastructure as part of a stronger relationship.