Vodafone Feels The Pinch And Slashes Jobs In Germany

In another sign Vodafone is not immune to tough market conditions and fierce competition, the mobile operator revealed it is to cut 500 jobs in Germany.

The decision to axe personnel in Europe’s largest economy comes after the operator witnessed declines in its core Northern European market.

Vodafone troubles

“We have started a two-year programme,” a Vodafone spokesman was quoted as saying by Reuters, confirming reports in the Frankfurter Allgemeine Zeitung and Rheinische Post.

Vodafone reportedly plans to shift some operations to Romania and India. It will also “considerably reduce” starting salaries.

Vodafone in Germany confirmed the job losses to TechWeekEurope.

“It is correct and we have set up a program that runs for two years. At the end of the two year period, 500 positions will be cut,” the Vodafone spokesman told TechweekEurope. “We are centralising our operations in this country as well as certain functions. Some of them such as networking monitoring are being outsourced to our collegues in Romania, and our IT functions are also being outsourced to a shared service company in India.”

“In addition, we are planning to consult with the relevant workers councils, and we are founding a service company where we will be transfering our customer operations (i.e. Vodafone’s German call centre) to. It maybe a separate company but it will be under the control of Vodafone Germany.”

The changes are being blamed on intense competition from local incumbent T-Mobile, the mobile unit of Deutsche Telekom. Vodafone is thought to be suffering because of low price offers for smartphones from T-Mobile.

The British mobile operator is also hurting from the European regulatory ruling that lowers the maximum fees mobile operators can charge for calls coming from other networks.

Yet the changes will not come as a major surprise to observers, considering Vodafone revealed in February it is struggling in Europe. It said it had suffered a worse than expected 2.6 percent decline in revenue during the fourth quarter of 2012 as income from Northern Europe decreased.

It reported that service revenue had declined 0.2 percent in Germany. However, more worryingly, it also revealed service revenue in the UK had decreased by 5.2 percent, prompting fears Vodafone could once again cut jobs in the UK.

“In the past we have taken these measure, for example when we outsourced our field service engineers that conduct base station servicing,” explained the Vodafone spokesman. “Some of our IT operations were outsourced to HP a couple of years ago. But we are investing more money than ever before. However we are competing in a tough environment with regulatory measures and price aggressive competition in Germany, and we need to fit for the future.”

“This change is about restructuring for the future and not just about cutting jobs,” the spokesman told TechweekEurope. “The framework we are in is getting tougher, which means we need to rethink our operations. For example, we found that we were paying some salaries that were 80 percent above the market average. We will guarentee existing salaraies but will implement new salary tarrifs.”

European problems

Vodafone has already toyed with its European operations.

Last year for example it separated its Northern and Central European business from its Southern European unit as part of a structural overhaul. It said conditions in Southern Europe continued to remain challenging, with revenues in Italy falling by 13.8 percent and Spain by 11.3 percent. In February, it axed 620 workers at its Spanish unit.

But now the contagion seems to have spread to its northern Europe operations, which have previously been immune to the troubles in the depressed southern European markets. It has even retreated from a number of markets, including France.

The good news is that Vodafone continues to see growth in its emerging markets such as India, South Africa and Turkey.

Although earlier this month shares in Vodafone tumbled after Verizon Communications denied speculation it was preparing to launch a bid for Vodafone’s stake in Verizon Wireless.

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