Margherita Della Valle, the new CEO of Vodafone (VOD.L), announced on Tuesday that she will remove 11,000 jobs over three years to streamline the telecoms group and reclaim its competitive edge, despite the company forecasting a 1.5 billion euro loss in free cash flow this year.
The job losses are the most significant in Vodafone’s history, as the company employs about 100,000 people across Europe and Africa, making it one of the most well-known corporate brands in the United Kingdom.
“Our performance has not been good enough,” said Della Valle, who was appointed permanently as CEO last month, adding: “My priorities are customers, simplicity, and growth”.
Vodafone was the biggest faller on the FTSE 100, falling 4.5% to its lowest level since early January.
“Lacklustre performance has been something markets have come to expect from Vodafone of late, and full-year results didn’t buck the trend,” said Matt Britzman, equity analyst at Hargreaves Lansdown.
Della Valle stated that Germany, Vodafone’s largest market, was underperforming and that Spain, which has seen fierce competition in recent years, was undergoing a strategic review.
Underscoring the business’s challenges, Vodafone announced that it would generate 3.3 billion euros ($3.6 billion) in cash this fiscal year, down from 4.8 billion euros in the year to March 31, 2023. Analysts predicted 3.6 billion euros.
For the fiscal year ending March 31, headwinds in Germany and rising energy prices led to a 1.3% drop in Vodafone’s group core earnings to 14.7 billion euros, falling short of the company’s own guidance.
Restructuring efforts and potential consolidation talks
According to Vodafone, the European telecoms industry has traditionally provided a poor return on capital spent in networks, and its relative performance has deteriorated over time.
Activist investors and competitors have also characterized the British group as cumbersome and slow to respond to market changes.
Della Valle stated that she will maximize the potential of business clients, a long-standing Vodafone strength, while focusing on the essentials in the consumer market, such as customer service.
Vodafone has already begun to reduce jobs in its major countries, laying off 1,000 workers in Italy early this year, and laying off roughly 1,300 in Germany, according to media reports.
Della Valle’s predecessor, Nick Read, who stepped down in December, had previously stated that consolidation was required in large markets such as the United Kingdom, where Vodafone has been in negotiations with rival Hutchison’s Three UK for at least nine months.
However, Vodafone stated on Tuesday that there was no guarantee that any transaction would be completed. It made no more remark on the talks.
