Vodafone presents turnaround plan which includes 11,000 job cuts

11,000 jobs in Europe are to be axed as Vodafone’s new boss Margherita Della Valle says: ‘Our performance has not been good enough. To consistently deliver, Vodafone must change.’

Vodafone’s new boss Margherita Della Valle means business. More specifically, Vodafone Business, which she believes could play a pivotal role in revitalising the whole company.

Presenting a turnaround plan for the troubled telco, Vodafone on Tuesday singled out Business as one of the bright spots, highlighting the 2.6% growth in service revenue it achieved during the 12 months to 31 March.

“Our market position and performance varies by geography and segment,” said Vodafone, noting there are “material differences between our Consumer and Business segments, with Business growing in nearly all European markets.”

The thing is, Business currently only accounts for 27% of group service revenue, whereas 51% comes from its European Consumer ops. This is where Vodafone is struggling the most – service revenue declined by 1.1%, dragging overall group service revenue down by 0.6% for the year.

Vodafone says Business has a unique set of capabilities, and has a strong position in a large and growing market as more and more companies execute their digital transformation strategies. As such, Vodafone plans to rebalance the company, putting greater emphasis on Vodafone Business, turning it into a larger cash cow than it is today.

Steering the company more towards enterprise could prove to be a shrewd move. More than ever, companies want to leverage high-speed, low-latency connectivity to optimise various business activities, and tap the benefits of cloud-based applications and storage.

There is also growing demand for 5G services – both public and private – that can unlock new ways of working, whether that’s through automated production processes or putting various categories of corporate data onto dedicated network slices, for example.

Offering 5G services beyond basic connectivity has long been hailed as holding the key to fresh revenue growth, and so a telco that is set up to capture these opportunities stands a better chance than most of turning this dream into reality.

As well as growing Vodafone Business, Della Valle also needs to stop the rot at the consumer operation.

Vodafone noted that telecoms offers one of the lowest returns on capital employed (ROCE) of any sector in Europe.

“More importantly, the comparative performance of Vodafone has worsened over time, which is connected to the experience of our customers,” Vodafone said.

To turn things around, Vodafone said it will go back to basics, offering a simple, predictable experience that customers expect, in an effort to return to customer-driven growth.

This includes greater investment in customer care and journeys, and efforts to “reinvigorate” the brand. This part of the plan is already underway – Vodafone has allocated €150 million in fiscal 2024 towards customer experience, while spending on brand promotion has gone up by €100 million year-on-year.

In addition, Vodafone also wants to create a more agile corporate structure. Part of that involves job cuts. Lots of job cuts – approximately 11,000 in Europe alone over the next three years. The cuts will be made at both head office and at individual opcos.

“Our performance has not been good enough. To consistently deliver, Vodafone must change,” said Della Valle. “My priorities are customers, simplicity and growth. We will simplify our organisation, cutting out complexity to regain our competitiveness. We will reallocate resources to deliver the quality service our customers expect and drive further growth from the unique position of Vodafone Business.”

The turnaround plan was presented alongside Vodafone’s full-year financials.

Group revenue edged up to €45.71 billion from €45.58 billion a year ago, as strong growth in Africa and higher equipment sales were offset by the aforementioned troubles in Europe. Adjusted earnings before interest, tax, depreciation and amortisation after leases (EBITDAal) fell 3.6% to €14.67 billion.

Vodafone ended March with 64.8 million mobile contract customers in Europe, down from 66.4 million in fiscal 2022. Similarly, its European broadband base fell to 24.7 million from 25.6 million.

Get the latest news straight to your inbox. Register for the Telecoms.com newsletter here.