Radicalism Needed At Vodafone, Says New Boss

Vodafone is a big company. They plan to cut 11,000 jobs in three years. But they won't save money because they will reinvest €250m (£220m). This happens in big European telecom companies. It's hard to find easy wins.

Vodafone's financial performance is worse than others. The new CEO said their performance is not good enough. The shareholders already knew this. The share price dropped by 7% on Tuesday. The share price has been halved over the past five years.

Della Valle used to be the finance director and was a candidate for the top job, but some people didn't want her. However, she talks in a clearer way than the previous leader, Nick Read.

Read was always making excuses for problems, even the lazy board of Vodafone had to do something. Della Valle can be honest and say that they've been too slow lately and made things too complicated internally.

Vodafone's previous CEO, Read, lost his job due to a mistake in Germany. Paddington and local management did not notice a change in consumer law. Other companies took advantage and gained 30% of Vodafone's revenue in the country. Della Valle's plan for a simpler management structure seems right. People have criticized Vodafone's large head office for a while.

Some people think Vodafone should have less smaller operations. This would make it simpler. However, Della Valle's statement on this issue was confusing.

Vodafone will have a review in Spain. Vodafone is struggling in the market. There is no solution yet. In Italy, Vodafone will continue forward. Talks with Three in the UK have not ended in a deal. An agreement is likely, but competition regulation may create problems. Answers will not come fast.

Della Valle needs to make deals to improve the share price. Investors don't care about customer service promises. Vodacom staying is not enough, something big must happen in Europe.

Della Valle presented a chart about returns on capital, which showed the UK, Italy and Spain were below the cost of capital. Even Germany, where Vodafone is the market leader, was just around the cost of capital. This is bad news. The dividend was held this time, but the market is questioning how long it will be sustainable, given the 9% yield.

Emirates Telecommunications Group owns 14.6% of the company and this could bring some new ideas. However, the success of Vodafone really depends on Della Valle finding good deals. Even if 11,000 employees are let go, the company is still too big and not valued at what it should be. This current structure wouldn't be created today.

Della Valle should be given a chance on her first major outing in the City. However, the decrease in Vodafone's share price can't only be attributed to the predicted weak cash flow for this year. Investors may feel that Della Valle hasn't shown how drastic her cuts to Vodafone will be. The shareholders want significant radicalism, and it's not an easy task.