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New CEO Of Vodafone Is Cutting 11,000 Jobs Globally To Decrease Costs

New CEO Of Vodafone Is Cutting 11,000 Jobs Globally To Decrease Costs
Margherita Della Valle, the new CEO of Vodafone, announced she will reduce 11,000 positions globally over the next three years to help the telecoms business regain 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 major 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 across Europe and Africa.
Della Valle was tasked with turning around Vodafone when she was promoted to CEO from CFO last month. A breakup of the group might benefit three big owners.
"To consistently deliver, Vodafone must change," she said. "My priorities are customers, simplicity and growth."
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 cuts announced on Tuesday 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 full or partial sale, was an option in Spain.
She believes Tuesday's share price drop was caused by the company's expectation of 3.3 billion euros ($3.6 billion) in cash flow this fiscal year, down 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 as a result of a legal change.
According to one large institutional investor, Vodafone still has a significant portfolio value, and the results did not change significantly.
The dividend was still sufficiently covered, according to the investor, but there was possibly 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 group was comfortable with current leverage. On Tuesday, the yield surpassed 10%.
"The new CEO has decided to maintain its dividend (a missed opportunity in our view and a concern the company remains unwilling to take necessary bolder action)," analysts at JP Morgan Cazenove said.
Vodafone reported a 1.3% drop in group core earnings to 14.7 billion euros for the year, falling short of its own forecast.
According to Della Valle, the European telecoms sector has traditionally provided a poor return on capital spent in networks, but Vodafone's relative performance has deteriorated over time.
Activist investors and competitors have also characterised the British business as cumbersome and slow to respond 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 basics like as 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 in discussions with rival Hutchison's Three UK for at least nine months.
On Tuesday, Vodafone stated that there was no guarantee that any transaction would be completed.
"It will take as long as it takes to get a good deal," Della Valle told reporters.

Christopher J. Mitchell

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