First the Germany boss gone and now also the boss of the British parent company. At the telecommunications group Vodafone, things are anything but smooth. Hannes Ametsreiter, who managed the British business in Germany, left in July. At the turn of the year, his boss Nick Read will succeed him.
After the announcement of bad quarterly figures in mid-November, he had announced an austerity program that was intended to reduce costs by one billion euros by 2026. But just three weeks later, in standard announcement prose, Read says he has “agreed with the board that now is the right time to hand over to a new leader who can build on Vodafone’s strengths and take advantage of significant opportunities ahead “.
You have to look for strengths at Vodafone at the moment, instead there are negative signs everywhere. One of the main reasons for Vodafone’s poor performance is the weakening business in Germany. However, it had long been rumored in the industry that the British parent company wanted to centralize services for cost reasons, but did not want to invest enough. Ametsreiter, who was head of Vodafone Germany for seven years, is mourned by many in the company. His successor, the Belgian Philippe Rogge, previously at Microsoft, has not taken on an easy job.
Things have been bad for Vodafone in Germany recently, especially in the broadband business. When it comes to cable connections for TV reception, customers are literally running away from the Düsseldorf-based company. In the third quarter, it lost 86,000 customers and only had a good 13 million connections. Two years ago it was almost half a million more. Internet via cable TV and DSL connections are also in the red, with 19,000 customers dropping out. Complaints about poor service quality were also piling up.
The competition pulls Vodafone away
Vodafone also has to think about the weak performance in mobile communications compared to the competition. Although the Düsseldorf-based company gained around 65,000 contract customers, Deutsche Telekom had 142,000 and Telefónica even 304,000. In mobile network tests, competitor Telefónica is now doing almost as well as Vodafone, while Telekom clearly leads.
Since Germany is Vodafone’s most important market, the result here naturally has a full impact on the consolidated balance sheet. But Vodafone also fell short of expectations in other European countries such as Italy and Spain. CEO Nick Read tried to take countermeasures and wanted to make big deals, but hardly any of them actually materialized.
CFO Margherita Della Valle is now temporarily taking over the business, while the supervisory board is looking for a new boss. A difficult task awaits the newcomer. It is important to save costs and at the same time push ahead with the expansion of the networks. In Germany, there could also be another frequency auction, which would incur additional costs. The bad news is also making itself felt in the stock market. Vodafone’s share price has been falling for a long time. Now it has slipped further and is just over one euro. In 2015, the shares were worth almost three and a half times as much.
The adapted strategy did not work
Nick Read had tried to stop the negative trend and bring money into the coffers. For example, he agreed to the sale of part of the recently spun-off subsidiary Vantage. The company owns Vodafone’s cell towers. He also sold companies in Hungary, New Zealand and Malta – as a kind of return to the core business in the industrialized countries of Europe.
But so far the plan hasn’t worked out. Vodafone’s poor performance in Germany becomes particularly clear when you compare the results of the competition. Telekom, for example, increased the number of its broadband connections by 63,000 in the third quarter. There are also negative trends here and there at the Bonn-based group, for example in the number of telephone connections – but this is more of a general trend than a particular failure of Telekom. Telefónica Deutschland, the subsidiary of the Spanish Telefónica, was also able to increase the number of broadband connections and grew by 19,000. The Munich company has also increased its network expansion and often operates on an equal footing with Vodafone.