Vodafone Layoffs: New CEO Plans To Eliminate 11,000 Positions And Projects Flat Revenue!
Vodafone shares, which have outperformed rivals in its key European countries, have dropped to their lowest level since 2002, trading down 9% by mid-afternoon.
Margherita Della Valle, the new Chief Executive Officer of Vodafone, publicized she would reduce 11,000 positions globally over the next three years to help the telecoms business recover its competitive edge after the company warned that bad performance in its largest market, Germany, would hurt cash flow.
Vodafone shares, which have outperformed rivals in its key European countries, have dropped to their lowest level since 2002, trading down 9% by mid-afternoon. The employment layoffs are the most significant in Vodafone’s history, as the company employs 90,000 workers directly throughout Europe and Africa.
Need of layoffs at Vodafone.
Della Valle was charged with turning around Vodafone when she was promoted to CEO from CFO last month. A breakup of the business might benefit three big owners. The firm must alter to consistently deliver, she claims. Customers, simplicity, and growth are her top goals. Della Valle targeted Vodafone’s central operations with 500 job layoffs when she took over at the start of the year. According to the corporation, 1,300 jobs will be lost in Germany, while 1,000 will be lost in Italy.
She told reporters that the extra cutbacks announced recently would be dispersed across its European markets, as well as more reductions in the centre. Della Valle stated that Germany, Vodafone’s largest market, was failing, while “structural change,” implying a complete or partial sale, was an option in Spain.
She believes the recent drop in share price is related to the company’s expectation of 3.3 billion euros ($3.6 billion) in cash flow this financial year, a slip from 4.8 billion euros in the year to end March 2023. Analysts estimated 3.6 billion euros. The CEO attributed the reduced projection to a shift in the timing of payments for cable TV in Germany due to a legal change.
Investor opinions about the firm.
According to one prominent institutional investor, Vodafone still has a significant portfolio value, and the results did not change much. The dividend was still sufficiently covered, according to the investor, but there was maybe more pressure to take some of the potential actions to unlock the group’s value. The board would decide on the dividend, but Della Valle noted a “significant” reduction in debt and stated that the firm was happy with its current leverage. Recently, the yield surpassed 10%.
According to JP Morgan Cazenove analysts, the new CEO has opted to keep the dividend, which is a missed opportunity in her opinion and a concern that the business continues to be hesitant to take necessary, more decisive action.
Vodafone reported a 1.3% drop in firm’s core earnings to 14.7 billion euros, falling short of its forecast. According to Della Valle, the European telecoms sector has traditionally provided a low return on capital spent in networks, but Vodafone’s relative performance has deteriorated over time.
Activist investors and competitors have also characterized the British business as cumbersome and sluggish to adapt to market shifts. Etisalat, an Emirati telecoms giant, has a 14.6% ownership, while French telecoms tycoon Xavier Niel, who competes with it in Italy, and Liberty Global, its Dutch partner, are also investors. According to analysts, all three are well-positioned for any sale of Vodafone’s operations.
Della Valle outlined her strategy, saying she will leverage the potential of business customers, a long-standing Vodafone strength, while focusing on consumer essentials like customer service.
Della Valle’s predecessor, Nick Read, who left down in December amid investor dissatisfaction, had previously stated that consolidation was required in large areas such as the United Kingdom, where Vodafone has been discussing with competitor Hutchison’s Three UK for at least nine months. Vodafone recently said there is no guarantee that any transaction will be completed. Della Valle told reporters that it would take as long as it took to secure a decent agreement.
Hope these efforts turn out to be a saviour for the firm.
Proofread & Published By Naveenika Chauhan
