Vodafone shares took a beating today amid company plans to layoff thousands of workers, and properly allocate resources.
Vodafone (LON: VOD) shares fell 7% on Tuesday following a mass layoff announcement by the British multinational telecom company. In a statement, chief executive officer Margherita Della Valle said the company’s plan to ax a record 11,000 jobs is necessary to remain profitable. Vodafone forecasted flat profit growth and explained that the massive downsizing would take place over three years. The cut accounts for a wipeout of just over 10% of the telecom giant’s 100,000 total headcounts.
Expositing on Vodafone’s most significant staff reduction in company history, the recently appointed Della Valle said:
“Our performance has not been good enough. To consistently deliver, Vodafone must change.”
Furthermore, the chief executive officer also added:
“My priorities are customers, simplicity, and growth. We will simplify our organization, 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.”
Vodafone Shares Drop to 84.77 GBX Amid Layoff & Restructuring Plans
Vodafone shares initially sank 7% following the layoff news but were trading down 5.84% at 84.77 GBX as of press time. The Berkshire-based telecom corporation faces stiff competition in key markets in Germany and Italy. However, it has a German turnaround plan and a strategic review in Spain. Furthermore, Vodafone also plans to tailor its continued pricing action to accommodate growth, with Della Valle saying that they “will focus our resources on a portfolio of right-sized products and geographies for growth and returns over time”.
The CEO stressed that Vodafone would rebalance its organizational structure to optimize the potential of Vodafone Business. The reason is that Vodafone Business is a crucial growth driver and has a strong position in an emerging digitized market.
Vodafone Seeks to Become a ‘Leaner and Simpler Organization’ that Focuses on Basics
Vodafone plans to cover ground amid investor criticism for moving too slowly and not adopting transformative changes quickly. According to Della Valle, the British telco will be a “leaner and simpler organization” that increases commercial agility and frees up resources.
Vodafone has reallocated substantial FY24 investments toward customer experience and brand. This development comes in light of the company’s underwhelming fiscal year 2023 performance.
Vodafone also seeks to refocus on essential customer experience service quality to gain an edge in consumer markets. This also includes delivering the simple and predictably good experiences that customers expect from the brand.
For the fiscal year ending March 31st, Vodafone reported a revenue haul of 45.7 billion euros ($49.7 billion). This figure remained unchanged versus the previous year, causing Vodafone to issue underwhelming guidance for FY24. For the fiscal year ending March 2024, the company said free cash flow would drop to 3.3 billion euros. Vodafone’s free cash flow stood at 4.8 billion euros the year before (FY23).
Vodafone is currently discussing a merger with Three UK owner CK Hutchinson. However, the telecom giant said there is no certainty that both parties would ultimately agree to a merger.
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