Slimming down: What’s happening at Vodafone?

Slimming down: What’s happening at Vodafone?

Vodafone staff are poised for an uncertain 2010, following Vodafone CEO Guy Laurence’s announcement last week that at least 375 staff are to be made redundant.

The move comes in a second £1bn cost-cutting exercise. In 2009, a tough year for Vodafone, staff endured a white knuckle ride through a £1bn cost-cutting programme that saw 500 jobs axed.

Despite a major restructuring at Vodafone last year, which saw it slash costs, re-forge a much-needed distribution agreement with Carphone Warehouse and finally clinch an iPhone deal with Apple, it is still lagging behind its rivals.

CCS Insight analyst Shaun Collins says Vodafone had a ‘good Q4’ and a ‘stronger second half’.

He adds: ‘But the KPIs for Q4 last year show that despite strong competition from Vodafone and Orange, O2 held its ground and that must be very worrying for Vodafone, particularly with the merger looming.

‘Their problem is that even though they have raised their game, their competitors are doing a great job.’

Collins believes disappointing results may have prompted Vodafone’s decision to instigate a further £1bn round of cuts for 2010. 

But will axing yet more jobs and cutting deep on costs this year do the trick? Not necessarily, asks Strategy Analytics analyst Phil Kendall.

He believes a hatchet job on staff may be counter productive. He says: ‘The fact that Vodafone has made cuts to the workforce and yet the margins are still falling means it has not been a particularly successful approach.

‘The cost structure is not necessarily a workforce issue – making staff bear the brunt of the need to increase EBITDA margins might not be the best approach because it could impact on Vodafone’s customer care and retail presence.’

Kendall believes Vodafone needs to look to other ways of increasing margins.

‘It is more about managing the revenue side, targeting high value customers and identifying which products in the portfolio are more profitable,’ he says.

But telecoms union CWU argues that Vodafone’s job cutting policy will backfire. It says the redundancies have been handled clumsily, further alienating staff from management and creating a disincentivised workforce.

One CWU source believes Vodafone is ‘making a mess of this redundancy programme’ by ‘mismanaging the process and taking an unnecessarily aggressive approach’.

It adds that the process is having a ‘bad impact’ on remaining staff, who are ‘confused, concerned and utterly demotivated’.

The union is calling for Vodafone to reconsider its process and look at less drastic options, for example redeployment and a voluntary approach to redundancies.

Vodafone staff, in anonymous emails sent to Mobile, blame incompetent management for the operator’s problems.

One employee says: ‘There has been a lack of credible leadership, vision and ability to make decisive decisions for several years. It now seems the workforce will suffer as a result of the ineffectual senior leadership – many of whom are still in (their) posts and should go – I fear this could be another rearrangement of the deck chairs on the titanic.’

Another adds: ‘Vodafone appears to be a business in desperate need of strong leadership and it is a shame that so many competent staff will be forced out of the company. They will pay the price for the lack of vision over the past five years.’

John Strand, MD of Strand Consult, agrees that Vodafone’s management has a case to answer. ‘Vodafone likes to blame O2 getting the iPhone first, but at the heart of its problems is the management’s decision to part company with Carphone Warehouse three years ago and focus on their own distribution.’

However, some believe Laurence is starting to make headway in tackling the company’s management heavy structure. One senior source says: ‘This is Guy Laurence imposing himself on the organisation. There are too many management layers, so he is delayering. He is giving more accountability to the individuals who could and should make the decisions.’

Vodafone must now tackle its consumer image if it is to make up ground outside of the business sector. Collins believes it is overdue for an image overhaul. ‘For some reason, consumers do not identify with Vodafone as a consumer brand. The perception is, “Vodafone gives my Dad his business phone”,’ he says, adding: ‘Vodafone needs to reach a younger and more female oriented segment.

‘Our research shows they are not attracting that segment. They need to find a way to bring the right propositions and tariffs to those segments and to reposition its brand in the UK.’

Vodafone is already taking steps to tackle this problem. Last month, it announced the impending arrival of former T-Mobile marketing chief Srini Gopalan as consumer director to replace Ian Shepherd, who left Vodafone in February, after four years at the company. Days later, Vodafone made its consumer sales director, Tom Devine, and retail director Terry O’Brien redundant and parted company with Ian Haynes, head of PAYG.

Vodafone needs to work on a younger, more inclusive image and must also be quicker at identifying market trends. Collins believes it is failing to recognise a fundamental shift from volume to value. He argues: ‘What Vodafone doesn’t seem to understand yet is that the number of people on its network is not as important as the value those customers bring.

‘Vodafone is too focused on customer market share. O2 recognised this shift sometime ago, which explains why, unlike Vodafone, it is not getting worked up about the Orange/T-Mobile merger.’

However, there is no room for complacency among Vodafone’s rivals – the entire UK mobile phone market is facing fundamental change. Strand predicts all the UK’s major operators will be forced to slash costs by at least 40% to meet the major cost of the infrastructure investment needed to support rocketing data usage.

Vodafone will need to make sure it is slimed down, efficient and attractive to consumers before it will be fit to move forward in the ever-changing mobile space.

Will the other networks need to make redundancies?

Vodafone had 9,000 staff before its first round of job cutting, leaving it with around 8,000 staff afterwards. Orange and O2 each have around 12,000 employees, while 3 has just under 3,000.

The Orange/T-Mobile merger means the two operators will clearly have to rationalise their workforces at some point. O2’s headcount looks large, but it may not need to cut jobs in the future if its staff productivity and overall profitability remains high enough to justify the numbers.

Meanwhile, T-Mobile’s workforce has been reduced by 20% over the last year as a result of ‘performance management’, which has reduced its head count from 6,382 to 5,142 over the last year.

HR director Ian Pitcher says that 391 of those were lost through ‘termination’, while the other 849 – 13% of its total workforce – left ‘when the heat was turned up’.

As a result of tougher performance management and those leaving of their own accord, T-Mobile has saved £25m on salaries.


Written by Mobile Today
Mobile Today


Vodafone have a great product but they dont seem to grasp the fact the cutomers pay for a service. Like lots of other businesses they got used to offe ...
I agree with the fact that we need new leaders with a newer vision, all senior leaders seem to suffer from tunnel vision here at Vodafone
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