Troubled Vodafone to cut 11,000 jobs as new boss says performance ‘not good enough’
Vodafone shares plunged to their lowest level in more than two decades as the new CEO’s blueprint to turn the company around fell flat.
Margherita Della Valle revealed plans to cut 11,000 jobs over the next three years after warning that the telecom giant “needs to change” to end a period of poor performance and revive its declining share price.
The cuts, equivalent to more than 10 percent of the FTSE 100 company’s 90,000 global workforce, will be targeted at Vodafone’s UK headquarters and local markets.
Slump: Vodafone shares crashed to their lowest level in more than two decades as new CEO’s turnaround plan fell flat
It came as Della Valle, who became permanent CEO of the group last month, said the company’s performance was “not good enough” and previous steps to improve the company were “too incremental.”
“We need to be much deeper and faster in our execution today,” she said.
“We are going to simplify our organization and remove complexity to regain our competitive position.”
But the strategy was met with frosty reception from investors and the shares fell as much as 10 percent to about 81 pence, their lowest level since 2002 after the dotcom tech bubble burst.
They later closed down 3.1 percent, or 2.76 pence, to 87.27 pence.
Analysts warned of “glaring flaws” in Della Valle’s plan, saying that “the drop in share price shows the group is not fooling anyone.”
Della Valle was Vodafone’s Chief Financial Officer before taking over as Chief Executive on an interim basis following the departure of Nick Read late last year as shareholders put pressure on the group to improve performance, particularly in its core German market.
Before his ouster last year, Read revealed plans to make around £883 million in cost savings.
The company said at the time it could lead to job cuts, but has not given a figure on how many positions will be cut.
In addition to cutting staff, Della Valle said Vodafone will launch a strategic review of its Spanish operations.
Merger talks between the telecom operator and Three UK owner CK Hutchison were also progressing, she said, adding that a deal will take “as long as it takes” but a link between the network and its UK arm would be “good for customers and good for the country’.
Plans for a radical overhaul came as Vodafone released a disappointing set of full-year results, with profits falling 1.3 per cent to £12.7bn for the year to the end of March, below the company’s expectation of more than £13bn.
Revenue rose 0.3 percent to £39.7 billion, but was lower than analysts had forecast.
The company’s cash flow forecast for the coming year also alarmed observers, with Vodafone forecasting around £2.9bn for the 2024 financial year, a figure not much higher than the £2.2bn dividend for 2023.
Karen Egan, senior telecoms analyst at research firm Enders Analysis, said the cash flow outlook was “disappointing” in light of the dividend bill and other costs related to restructuring.