Vodafone to slash 11,000 jobs as part of new CEO’s transformation

It’s been three weeks since Margherita Della Valle was named the CEO of Vodafone Group, and she’s had about five months to evaluate the company’s situation as interim CEO.

That led her to conclude the company is due for a significant redesign, which includes the reduction of 11,000 positions over the next three years, starting at Vodafone’s U.K. headquarters and its operations in Germany and Italy.

“Our performance relative to major competitors has also not been good enough. This requires Vodafone to change. And by change, I mean a significant redesign of where we focus our efforts and how we organize ourselves,” Della Valle said in a Tuesday conference call with analysts, according to a SeekingAlpha transcript.

The job cuts are the biggest in the history of the company, Reuters reported. The company employs about 100,000 worldwide.

Telco returns are among the lowest in Europe while the capital investment demands are high. But Vodafone in particular needs to get back to the basics when it comes to winning over customers in the market, and that’s part of the roadmap to getting back on track, according to Della Valle’s presentation for investors.

For the fiscal year, Vodafone Group reported revenue increased by 0.3% to $49.8 billion driven by growth in Africa and higher equipment sales, offset by lower European service revenue and adverse exchange rate movements.

Shares of Vodafone were down about 7% today, trading in the range of $10.43.

In a report for investors, New Street Research (NSR) analyst James Ratzer noted the market wasn’t taking well to Vodafone’s results or comments made on the earnings call. “Although it’s fair the guidance is disappointing, Vodafone’s now 11% underperformance vs. the sector YTD seems harsh,” he wrote.

While Della Valle’s overall strategy based around “Customers. Simplicity. Growth” seems highly sensible, “it is action rather than words that will count most,” he said. “We see overall industry trends as broadly benign, which should be supportive to Vodafone over the medium term, but at this stage, based on the announcements made today, it is hard to see the tangible benefits that will come from her new initiatives, and it will all come down to future execution of the plan.”