Tough call for Vodaphone
'Tighten your belts'
by Emma Midgley
Newbury workers are feeling the pinch as mobile phone company Vodafone announces that it will have to find £1bn of savings world-wide by 2011. Our BBC Berkshire finance experts discuss how this will affect local industries.
Newbury-based mobile phone giant Vodafone has announced that it will need to find £1bn of savings world-wide by 2011 - and that could mean job losses closer to home.
Brian Scott-Quinn is professor of finance at Henley Business School, which is part of Reading University.
He is predicting that this recession will hit harder in the South East, where the job market is dominated by the banking and technology industries, than in the North, where a weak pound will bolster export orientated industries.
He said: "Vodafone is no different from any other industry in the country. If you visit any company in the South East of England, around two thirds are gradually getting rid of staff. Banks are certainly laying off people."
And finance guru David Kuo, from website www.fool.co.uk, agrees.
He said: "I think people who work for Vodafone should be worried about job cuts. But my advice to everyone ever since I heard about this credit crunch is to live as if you're going to lose your job tomorrow. Don't spend and don't go out and take on debt you can't afford because you could easily get that P45 tomorrow.
And the two finance experts deny that the mobile phone companies have had it too easy for too long.
According to Dr Scott-Quinn and Mr Kuo, the mobile phone market is highly competitive, particularly in the UK where customers are savvy to the benefits of shopping around for cheaper deals, and now are turning to cost cutting SIM card only deals, which do not require the mobile phone customer to buy a phone or enter into a contract.
Dr Cooper, inventor of the mobile phone
Mr Kuo said: "Vodafone have to think of their profit margins, which are shrinking. Customers shop around and that means the company makes less money.
"It's probably a little unfair to say Vodafone has been making huge amount of money in the past because since the Millennium and the dot com boom it's invested a lot of money in the mobile phone infrastructure of the UK.
"The point about the mobile phone companies is that they have to invest in the phone masts in order to provide a service for customers."
Dr Scott-Quinn agreed.
He said: "The problem with any company is if you don't keep ahead of the market you will disappear. This is about long-term survival. Cutting back now means that companies can survive into the future."
Mobile phone users could save pounds
And there is a silver lining to every cloud - mobile phone users could benefit from lower charges.
Dr Scott-Quinn predicts the tough mobile phone market will mean that companies will be keener to reward loyal customers, both in business and in retail.
He said: "I think phone companies are trying to build up more loyalty, to make staying with them more popular. At the moment the turnover of customers is very high. I think this will mean better deals for mobile phone customers."
And chief executive of Vodafone Vittorio Colao, who took over from Arun Sarin in the summer of 2008, gave a similar promise as he announced the £1bn cutbacks.
last updated: 11/11/2008 at 14:54