Vodafone to cut 500 UK jobs

Vodafone has confirmed plans to cut about 500 jobs in the UK as part of a program announced last year to reduce annual costs by £1bn, the potential shortfall in revenues that the company believes it could suffer this year.

The world’s largest cellco by revenue employs 10,000 people in the UK, and the about two-thirds of the losses will be in the UK national organisation, and the rest at global headquarters in Newbury, west of London. Many cuts will come in back office functions and through a reorganisation of call centres and the eight regional centres.

The main focus is on the UK market itself, which has recently underperformed the company average, because of vicious competition and price cutting on voice and mobile broadband, in a territory where there are five 3G carriers. “Vodafone UK has today announced reductions to its operating costs in order for it to compete more effectively in the UK market,” the company said in a statement. The UK company’s EBITDA margin is just 23.2%, compared to about 45% in Germany (Vodafone’s largest market) and Italy, and this could get worse, as customers tighten their belts, if cost cutting is not stringent.

Although the group has improved its full year forecast since CEO Vittorio Colao warned of a possible £1bn shortfall in fiscal 2008, this was mainly because of benefits from the weakening of sterling and the same pattern cannot be guaranteed in 2009.

Although the operator denied it would close stores, it does plan to shift more of its business towards online sales and services.

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