More Vodafone cuts expected

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Vodafone is expected to make further redundancies in its European operations as part of broader cost-cutting measures, to be announced tomorrow (November 10, 2009) as part of its half-year financial results.

Vodafone Group chief executive Vittorio Colao will raise targets for cost-base savings to around £1.5 billion, analysts said. Its target is currently to reduce operating expenses by £1 billion per year by 2010.

Analysts said the measures will be to preserve margins and cash generation in mature European markets.

Vodafone’s results are expected to show a reduction in the rate of its revenue loss in Europe, compared with last quarter. Its business in emerging markets will show strong growth again. Analysts predict however it will not sustain the same rate of growth in India, a lucrative region for it in recent times.

ORACA lead telecoms analyst Christopher Nicholson says: “Job cuts are likely to happen in Europe in order to preserve margins and so cash generation, a fundamental value driver. From our perspective, cash generation in Europe is the main concern for Vodafone, emerging markets are likely to have performed well but Europe perhaps not so well.”

Goldman Sachs International analyst Tim Boddy says: “We estimate a large slowdown in growth in India, we think Vodafone will respond to these pressures by reducing capital expenditure in rural areas. The pace of revenue erosion has stabilised during the quarter and forecast year on year European service revenues will fall 5.2 per cent, slightly better than the 5.5 per cent indicated at fiscal Q1 results.”

 

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