Guwahati: Margherita Della Valle, the new CEO of Vodafone, announced on Tuesday that she will eliminate 11,000 employees over the next three years to streamline the telecoms group and reclaim its competitive edge as it anticipates a 1.5 billion euro decline in free cash flow this year.
This will be the largest layoff in Vodafone’s history. Vodafone employs close to 100,000 people throughout Europe and Africa, making it one of the most well-known corporate names in Britain.
Della Valle, who was appointed permanently as CEO last month said, “Our performance has not been good enough. My priorities are customers, simplicity and growth.”
Notably, the FTSE 100’s largest faller at the opening bell was Vodafone, which fell to its lowest point since early January.
Equity analyst with Hargreaves Lansdown Matt Britzman said, “Lacklustre performance has been something markets have come to expect from Vodafone of late, and full-year results didn’t buck the trend.”
Germany, the largest market for Vodafone, was underperforming, and Spain, which had recently experienced fierce competition, was undergoing a strategic review, according to Della Valle.
The impact on the company was highlighted by Vodafone’s prediction that it will generate 3.3 billion euros, or around USD 3.6 billion, in cash during this fiscal year, down from 4.8 billion euros in the year ending March 2023. Cash flow creation exceeded analysts’ expectations by almost 3.6 billion euros.
Pressures in Germany and skyrocketing energy prices caused Vodafone’s group core earnings for the year ended in March to shrink by 1.3% to 14.7 billion euros, falling short of its own forecast.
According to Vodafone, the European telecoms industry has historically provided a poor return on capital invested in networks, and over time, this situation has gotten worse.
Moreover, rivals and activist investors have criticised the British business for being slow to react to shifts in the market environment.
While putting emphasis on fundamentals like customer service in the consumer market, Della Valle stated that she would try to exploit the potential of business customers, which have historically been a strength for Vodafone.
In Italy, Vodafone slashed 1,000 positions earlier this year, while a media source claimed the company planned to eliminate 1,300 workers in Germany.
Consolidation is necessary in big markets like Britain, where Vodafone has been in negotiations with rival Hutchinson’s Three UK for at least nine months, according to Nick Read, Della Valle’s predecessor.
Vodafone declined to comment further on the negotiations on Tuesday, stating that there could be no assurance that any acquisition would finally be approved.