Vodafone's interim CEO faces first public test as calls for change grow

The logo of Vodafone is seen on the facade of a store in Ronda
FILE PHOTO-The logo of Vodafone is seen on the facade of a store in Ronda, Spain, October 3, 2022. REUTERS/Jon Nazca

LONDON/MILAN, Italy, Jan 31 (Reuters) - Vodafone shareholders will look for two things from interim CEO Margherita Della Valle at her first results presentation on Wednesday - how she plans to arrest immediate problems in markets like Germany, and any hint of long-term plans that could land her the top job permanently.

Della Valle will present the company's third-quarter earnings following her appointment in December, when Nick Read stepped down after four years during which the share price nearly halved.

She has been tasked by the board with accelerating the "execution of the company's strategy to improve operational performance and deliver shareholder value". It's a tough ask.

Vodafone is battling high energy costs and rising inflation. Read in November lowered the company's core earnings guidance to the lower half of its previous range, and cut its adjusted free cash flow guidance by 200 million euros ($217 million).

He sought to appease investors' concerns by announcing an additional 1 billion euros of savings in the period to end March 2026, driven by a simplification of the group's structure.

Hundreds of head office jobs are currently being cut, sources have said, increasing the pressure on Della Valle - also the group's chief financial officer - to lift morale.

Internal slides viewed by Reuters show the changes will streamline and simplify the company's Group Business division, as well as central functions such as finance, HR and legal affairs, with more responsibility moving to country operating companies.

"To deliver growth and accelerate commercial performance, local markets will have full flexibility, autonomy, and decision-making authority to act quickly on all commercial decisions relating to core connectivity," Vodafone Business head Vinod Kumar told staff in an internal memo.

Unions in Italy are also braced for job cuts, according to a source.

A Vodafone spokesperson said: "We have said we are reviewing our operating model, focusing on streamlining and simplifying the group."

Germany, Vodafone's biggest market, will offer little immediate relief to Della Valle.

The group has taken steps to address operational problems in the country, but she told investors in November that mobile service revenue would deteriorate further in the third and fourth quarters before improving.

But positive signs in Germany would be welcomed by shareholders, as would any good news on Spain and Italy, where intense competition has eroded returns.

Della Valle has not publicly thrown her hat into the ring for the permanent job, but shareholders will be alert to any longer term strategy.

French telecoms billionaire Xavier Niel, who owns 2.5% of Vodafone, said in December that the next CEO should streamline the company, sell infrastructure to reduce debt, improve margins and focus on broadband in Germany.

($1 = 0.9214 euros)

Writing by Paul Sandle; Editing by Jan Harvey

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