Vodafone's newly appointed CEO, Margherita Della Valle, revealed plans on Tuesday to reduce the company's workforce by 11,000 employees over a three-year period.
This strategic move aims to streamline operations and regain Vodafone's competitive edge in the telecommunications industry. The company also projected a 1.5 billion euro decrease in free cash flow for the current year.
The scale of these job cuts marks a significant milestone in Vodafone's history, considering its employment of approximately 100,000 individuals across Europe and Africa, making it one of the most prominent corporate brands in Britain.
Della Valle acknowledged the company's underwhelming performance, stating, "Our performance has not been good enough," and emphasized her priorities of focusing on customers, simplicity, and growth.
Following the announcement, Vodafone's stock opened 4.5% lower, becoming the biggest decliner in the FTSE 100 index and reaching its lowest level since early January.
Matt Britzman, an equity analyst at Hargreaves Lansdown, commented on Vodafone's lackluster performance, stating, "Lackluster performance has been something markets have come to expect from Vodafone of late, and full-year results didn't buck the trend."
Della Valle highlighted Germany, Vodafone's largest market, as an underperforming region, while Spain, which has experienced intense competition in recent years, is currently under strategic review.
The company's financial forecast indicates a decrease in cash generation, with Vodafone expecting to generate 3.3 billion euros ($3.6 billion) this financial year, compared to 4.8 billion euros in the previous year ending in March 2023. Analysts had initially anticipated 3.6 billion euros.
In the year ending in March, Vodafone experienced pressure in the German market and faced higher energy costs, resulting in a 1.3% decline in the company's group core earnings, amounting to 14.7 billion euros, falling short of its own guidance.
Vodafone highlighted the poor return on capital invested in networks within the European telecoms market, noting that its relative performance had deteriorated over time.
The company's CEO, Della Valle, intends to capitalize on business customers, which has been a longstanding strength of Vodafone, while prioritizing customer service and focusing on essential aspects within the consumer market.
Vodafone has already initiated job cuts in its key markets, eliminating 1,000 positions in Italy earlier this year, and is reportedly considering a reduction of around 1,300 jobs in Germany.
Della Valle's predecessor, Nick Read, who resigned in December, had emphasized the need for consolidation in major markets such as Britain, where Vodafone has engaged in discussions with Hutchison's Three UK for at least nine months. However, Vodafone stated that there is currently no certainty regarding the finalization of any potential transaction and declined to provide further comment on the ongoing talks. Photo by Maksym Kozlenko, Wikimedia commons.