Margherita Della Valle, the new CEO of Vodafone, has announced plans to cut 11,000 jobs globally over the next three years in an effort to boost the company’s competitiveness.
The decision comes after Vodafone warned of poor performance in its largest market, Germany, which would impact cash flow. The company’s shares have plummeted to their lowest level since 2002, experiencing a 9% decline by mid-afternoon.
11000 Job cuts in Vodafone Announced by CEO Margherita Della Valle
These job cuts mark the largest reduction in Vodafone’s history, as the company currently employs around 90,000 people across Europe and Africa. Della Valle, who recently transitioned from the position of CFO to CEO, aims to initiate significant changes within Vodafone, prioritizing customers, simplicity, and growth.
Earlier this year, Della Valle initiated 500 job cuts in Vodafone’s central operations. In March, it was announced that 1,300 positions would be eliminated in Germany and another 1,000 in Italy. The additional cuts, unveiled recently, will be distributed across European markets and further reductions will be made internally.
Della Valle highlighted Germany as an underperforming market and suggested that structural changes, including a potential full or partial sale, could be considered for Spain. The share price decline can be attributed to the company’s cash flow forecast for the current fiscal year, expecting 3.3 billion euros compared to the previous year’s 4.8 billion euros, falling short of analysts’ expectations.
Vodafone Reports 1.3% Decline in Group Core Earnings
While some investors believe there is still significant portfolio value within Vodafone, there is mounting pressure to unlock the company’s potential. Della Valle assured that the dividend would remain intact, emphasizing a significant reduction in debt and expressing confidence in the company’s leverage. However, analysts at JP Morgan Cazenove expressed concern that Vodafone should take bolder action.
Vodafone reported a 1.3% decline in group core earnings to 14.7 billion euros for the year, missing its own guidance. Della Valle acknowledged the historically low returns on capital invested in the European telecoms market and emphasized the need for Vodafone to improve its relative performance.
Activist investors and rivals have criticized Vodafone for being slow to adapt to market changes. Emirati telecoms firm Etisalat, French telecoms billionaire Xavier Niel, and Liberty Global have all invested in Vodafone, with analysts suggesting their positioning for a potential sale of the company’s operations.
