Vodafone to cut 11,000 jobs to make company 'simpler'
What's the story
British telecom giant Vodafone has decided to cut 11,000 jobs in the next three years, the company's new CEO Margherita Della Valle said. The announcement comes amid a forecast of a €1.5 billion drop in the firm's free cash flow this year. Vodafone has a total workforce of around 100,000 and is one of the most-known British brands worldwide.
Context
Why does this story matter?
Vodafone's struggles are not new. The company's lackluster performance in the last few years resulted in former CEO Nick Read stepping down in December last year. During Read's four-year tenure, the firm's share price declined by around 40%. It has been trying to get back to its glory days for a while. The layoffs might be a last-ditch effort.
Layoff
Layoffs will be biggest in Vodafone's history
Vodafone expects the layoffs to make the company "simpler." "Our performance has not been good enough. To consistently deliver, Vodafone must change," said Della Valle, who was appointed permanent CEO this month. "My priorities are customers, simplicity, and growth. We will simplify our organization, cutting out complexity to regain our competitiveness," she added. This will be the biggest round of layoffs in Vodafone's history.
Performance
Vodafone struggled in key markets like Germany
Vodafone failed to make a mark in the last financial year. The company struggled in some of its biggest markets, including Germany, Italy, and Spain. It managed to eke out a moderate 0.3% increase in revenue to €45.7 billion, courtesy of growth in Africa and equipment sales. The group's core earnings, however, fell to €14.7 billion due to higher costs and underperformance in Germany.
Struggles
Group's return on capital consistently low
The new CEO also talked about Vodafone's struggles in Europe. She said the European telecommunication sector has low ROCE (return on capital employed) and high capital investment demands. For a decade, the group's ROCE has been below the WACC (weighted average cost of capital). The company's poor guidance for the fiscal year ending March 2024 is a clear indication of its struggles.
Priorities
Company to allocate resources to improve customer experience
Layoffs are only a part of Vodafone's plan to make the company great again. The telco also plans to allocate significant resources in FY24 to improve customer experience. One of its main goals is to turn around the business in Germany. The group will also conduct a strategic review of Spain and continued pricing action to drive growth.