Vodafone announces 11,000 job cuts; These are comments coming from Margherita Dela Valle. She became chief executive of Vodafone at the beginning of the month, having been the interim chief executive for five months before that. Prior to that, she was also chief financial officer.
So when she’s criticizing past performance, there’s an element of self criticism in that herself, because she’s been a very established member of the Vodafone board for quite a while. But as you say, the headline is that 11,000 jobs are going to be going over the next three years.
To put that into context, Vodafone employs, at the end of last year, some 104,000 people globally. There’s been no real indication as to where the axe is going to fall, other than for Vodafone to say that it will probably be a mixture of headquarters jobs and across local markets.
And the backdrop to this case is that really, Vodafone’s performance over many, many years now has been pretty stagnant. Its biggest market is Germany. The UK is actually only its third largest market these days, even though it is a UK listed company, and of course, founded in Newbury in Berkshire, which is where a lot of employees still work.
But the markets in which it competes, chiefly Germany, but also the UK, Italy, Spain, they are all incredibly competitive. There hasn’t been the same sort of consolidation in the mobile market that we’ve seen in some other economies around the world.
And it’s something that Vodafone has been pressing for itself for many years and in fact, it’s currently in on off talks right now with three UK potentially about bringing together its UK business with that of three UK.
But really, margins in the sector are very, very low. The financial performance has, as I say, this is not a new thing. It’s been a lackluster. Performance for quite a while now. Its return on capital invested at times has not even met its cost of capital.
In other words, that is not a metric that you want to be looked at very closely. Margherita Dela Valle really aiming to put that right. The company reported its full year results today, by the way, underlying earnings during the course of the year fell by 1.3%, which really speaks to the fact that this is a very competitive field indeed in which it’s playing.