Vodafone, one of the world’s largest telecommunications services, has become the latest tech company to announce mass layoffs as part of a “turnaround” plan to help the carrier regain its competitive edge following periods of underperformance.
Della Valle, an Italian businesswoman who was given the authorization to turn the company around when appointed chief executive in late April, said the job cuts would affect both the firm’s headquarters and local markets in other countries.
Setting out her roadmap, Della Valle also said she would maximize the potential of business customers, a long-standing Vodafone strength, while focusing on the basics, such as customer service.
“Our performance has not been good enough. To consistently deliver, Vodafone must change,” she said. “My priorities are customers, simplicity, and growth. We will simplify our organization, cutting out complexity to regain our competitiveness.”
Germany, the UK-based company’s biggest market, has been performing poorly, she added, pointing out the company is considering a strategic review for Spain, which has seen strong price competition in recent years.
According to financial results as of March 31, revenue in Germany fell by 1.6 percent largely due to broadband and customer losses as well as declining average revenue for mobile users. In Spain, revenue declined by 5.4 percent due to price competition in the value segment and a declining customer base.
Vodafone reported a 30 percent total revenue contribution in Germany, more than double compared to the carrier’s second-largest consumer, the United Kingdom, where overall revenue saw a 3.6 percent increase.
Worsening Outlook
Vodafone reported a 1.3 percent overall decline in group core earnings to €14.7 billion ($15.9 billion) for the year, below the company’s own guidance, citing higher energy costs and commercial underperformance in Germany.Shares in Vodafone, meanwhile, fell to their lowest level since early January and were trading down 4 percent early on Tuesday. The price fall was most likely down to its forecast of €3.3 billion ($3.6 billion) of cash flow this financial year, down from €4.8 billion ($5.2 billion) in the year to end-March, Della Valle said.
Della Valle also said the European telecoms market had long delivered a poor return on the capital invested in networks, but Vodafone’s relative performance had worsened over time.
Additionally, Vodafone already started to cut jobs in big markets, shedding 1,000 in Italy this year. In Germany, the company’s regional boss Philippe Rogge said in late March that he was looking to cut around 1,300 positions, or around 6.3 percent of the 14,230 full-time jobs, according to German newspaper Handelsblatt.
“If we want to finance our ambitions, we have to take this painful step,” said Rogge, who is also a member of the group’s board of directors in London.
Della Valle’s predecessor, Nick Read, who stepped down in December amid investor frustration, had said consolidation was needed in major markets like Britain, where Vodafone has been in talks with Hutchison’s Three UK for at least nine months.
Vodafone said on Tuesday there could be no certainty that any transaction would ultimately be agreed.
Mass Layoffs Amid Economic Woes
The announcement comes amid mass layoffs in different sectors globally that started late last year and have continued into 2023. So far, the number of tech layoffs globally this year has exceeded the total number from a year ago.The unemployment rate dropped slightly to 3.4 percent, down from 3.5 percent, according to the BLS.
Eren added: “The slowing economy will reduce labor demand. We expect the unemployment rate to rise to around 4.5 percent by the beginning of 2024.”
