Vodafone's stable results achieved with cost cutting not services
Published: 11 November, 2009
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US joint venture Verizon Wireless contributed about 34% of adjusted operating profit, and grew organic service revenue by 7.5%.
Vodafone confirmed its guidance of adjusted operating profit in the range of £11bn to £11.8bn for its full fiscal year.
Despite the success of the carrier's cost containment, some analysts fear it is relying too much on this to keep its results healthy in a difficult climate, and not being proactive enough in creating new market share, value and services in mature markets.
"While the financial markets can be wooed by the size or the scale of Vodafone's operations, it will do little to entice new customers. Besides, market realities and financial constraints do not allow Vodafone much room for manoeuver in the M&A market," wrote Emeka Obiodu of Ovum in a research note. "Vodafone's current cost cutting drive is helping to create an internally efficient company. But cost cutting has its limits, and should support competitive strategy rather than drive strategy. We have already seen other operators cut costs, ruling out any hope Vodafone has of using its cost cutting to gain a competitive advantage in the long run."
Also cutting costs is Sprint Nextel, which has announced plans for 2,000 to 2,500 job losses, about 5% of its workforce, which could save $350m in annual labor costs. The cuts will see Sprint take a charge of $60m to $80m in the fourth quarter. In January,
Sprint announced plans to eliminate 8,000 jobs and also shifted 6,000 workers to Ericsson in an outsourcing deal.
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