Vodafone announced this week a new ERE that could affect 1,200 employees, the third in six years and whose casualties would be added to the 1,959 previous affected. The worst financial results and the fierceness of a market increasingly chosen by the low cost are indicated as the main motivators of a justified measure for “economic, productive and organizational” reasons.
But Vodafone would point further after admitting that “close to 50% of gross registrations are associated with low and medium cost offers, which requires having a cost structure prepared” by the “strong pressures” on the margins of the business, seeking to guarantee the competitiveness of the offer in all segments. Do you want to make us think Vodafone with these statements that wants to look a little more like the model that is leading to the success of the MásMóvil group?
Vodafone seems somewhat unfortunate to establish a plan in the medium and long term that is able to make the company grow back instead of being increasingly lagging behind in third place, which came after Orange overtook both by number of clients as per income.
An integration with ONO something disastrous, the concentration of the market that has not covered the expectations of long-term operators and the taking of questioned decisions such as significantly reduce its wholesale business, the resignation of football or short-term measures such as the commitment to depend Third-party fiber networks would also not have helped to grow revenue from services.
In addition, raising prices unilaterally is increasingly risky due to the sufficiency of users who have chained several price increases over the last four years. Movistar has already advanced a new round of increases for 2019 but Orange has taken a turn in its strategy and will improve its mobile rates without changing prices.
Although we can not rule out future increases that may affect Orange’s combined fiber and mobile offerings, with the advance of not raising prices for part of the customers, Vodafone has more pressure than ever to not raise rates, especially since it does not have any the excuse of having to pay the fees for the broadcast of football.
At the crossroads, Vodafone has chosen at the moment to repeat the same solution of the past and will make its workers who suffer again the consequences of a strategy more focused on low cost. The EREs are another excuse to lighten costs. With the passage of time, the previous dismissals have been replaced by new hires, but with worse conditions for new workers.
The figures are not good for Vodafone
Vodafone’s revenues have suffered for several semesters in the main European markets but in Spain it is where income braking is most noticeable and in the short term it has no expectations of improvement. A situation that could be related to the strong competitive environment of Spain, similar to that of Italy, although here have affected other factors such as football goodbye.
Vodafone decided this year not to offer all the football and its consequences were hard to notice in the results of portability although from the operator they said that it was more profitable for them to lose lines with football than having to pay for the rights with the current distribution formula. costs
But the portability problems of Vodafone came from before and the football effect “only” increased them in a timely manner. The operator was already dragging the worst accumulated annual while Orange, and especially Movistar, was much better. With Vodafone losing the most valuable customers (those who paid for football) and also losing them at a higher rate, the revenues would suffer, and they will continue to do so if their client base does not increase.
The solution to reverse the negative trend would be to try to become more competitive without sinking the ARPU (average revenue per client), to gain more customers, and on the other hand to push customers to pay more with new services.
Vodafone’s mobile network continues to be one of the biggest assets for which it continues to bet more clearly, being the operator that has paid the most for the frequencies for 5G, but it does not seem to be decisive in attracting the attention of users and passengers. They also do not seem as loyal as the operator would like.
The change of strategy that was being implemented has already affected the low and medium cost segment, which would be covered by Lowi and Vodafone Bit respectively, but the operator needs a revulsive to revitalize the premium offer, where television has a great weight and hard competitors that loyalty with all football.
Will the slimming costs serve to make Vodafone look a little more like Yoigo and thus regain growth? How relevant will it be to have a smaller platform when customer satisfaction is at stake?