An “accounting error” that could run into “millions of pounds” compounds falling revenues from the business unit.
British new outlets including the Daily Telegraph, the Mail on Sunday have reported that Vodafone is to restructure its business division. Formerly the division made more than £1 billion revenue, but this has declined in recent years and it lost its IoT leader crown to Telenor.
The reorganisation is apparently supposed to be secret and code-named Project Galaxy.
Overestimated income
To add to the division’s woes, it will receive rather less income than expected from some multi-national clients. Vodafone described this as an “accounting glitch”, which is something of an embarrassment for Group CEO Nick Read who is himself an accountant and formerly the Group’s CFO.
The “accounting glitch” arose from Vodafone overestimating bills for small number of clients: the amounts received were less than predicted due to the operator failing to factor in less business travel during lockdowns and the subsequent loss of roaming income.
The division operates through hubs in the UK and the European Union and it is thought to have about 900 contracts.
Now the plan is to devolve the business across a number of in-country units so that larger customers can be served from within their home countries. It has also been noted that this would also make these units easier to spin off or sell.
Under pressure
In recent days, emerged that Cevian Capital has taken a £37 billion stake in Vodafone Group and is putting pressure on Read regarding its operational and financial performance, its lack of telecoms expertise on the board, and to divest or merge operations of its smaller opcos to streamline the overall business.
Since becoming Group CEO, Read, Vodafone’s share price has fallen to £1.35 from £1.60 in 2018. He has made it clear on several occasions that he is in favour of offloading or bulking up its smaller opcos and the group is already involved in multiple M&A negotiations in its smaller markets.
Rumours are rife
The constant flow of leaks to the press is making it difficult to form a cohesive picture.
In the UK, the merger of Virgin Media and O2 last year has upped the ante. The latest reports suggest Vodafone is under pressure to sell off its operator in the UK, its domestic market. Vodafone is understood to be in talks to merge with Three UK, but they are on hold while UK competition authorities investigate Three’s proposed sale of its UK tower estate to Cellnex, which is part of a wider pan-European deal.
In Italy first it was reported that Vodafone was looking to merge with French company Iliad’s Italian operation, Free. Earlier this week it seems that Iliad had made Vodafone an offer to buy its entire Italian business. Meanwhile the incumbent, TIM, is holding off a bid by infrastructure investor KKR to gain a controlling stake.
In Spain, where competition is especially fierce, rumours of Vodafone merging with MasMovil, have been going on for months, but now it apparently Orange Spain is also pursuing a merger with MasMovil.