Vodafone will scrap it’s annual bonus payouts for staff this year in an attempt to cut costs if performance does not improve in the second half of the year.
Around 4,500 staff at its Newbury headquarters were informed in a recorded announcement by outgoing Vodafone UK chief executive Nick Read last Tuesday (November 11) that Vodafone’s poor performance during the six months ending September might prevent staff from receiving their bonuses next summer.
Bonuses are based on both company and individual performance, as well as salary.
Vodafone said last week, on the back of a slide in organic group profits of 3.2 per cent and UK profits of 14.2 per cent, it will cut its annual operating costs by £1 billion by 2011. The network has already cut 450 jobs this year from its Newbury headquarters.
Watchers predicted the UK operation would not bear the brunt of the cuts, despite being one of Vodafone’s worst performing units. “In the UK there will be wastage cuts, but nothing drastic,” suggested Global Insight telecoms research analyst for Western Europe Peter Boyland.
Vodafone admitted group revenue growth for the period, up 17.1 per cent to £19.9 billion, was largely down to foreign currency benefits. UK revenue was down 1.1 per cent at £2.5 billion, with a decline in voice revenue of £138 million and a jump in data revenue of £53 million.
It had 18.7 million UK customers at September 31, up 207,000 in the quarter. UK contract churn was down 0.5 per cent, to 17.5 per cent, but contract ARPU was down £0.70 to £40.50.
Read’s message was a warning shot to staff to raise their game through March 31, Vodafone’s year-end.