Vodafone Adjusts to Hard Times

Vodafone Group plc (NYSE: VOD) cut its revenue forecast for the second time this year and launched a new £1 billion (US$1.5 billion) cost reduction plan in response to the worsening economic climate across all its markets.

The giant mobile operator revealed its restructuring plans, a new corporate strategy, and its revised full-year outlook as it reported its fiscal half-year results today. (See Vodafone Closes H1.)

Given the dramatic, worldwide, economic deterioration, Vodafone's new CEO, Vittorio Colao, has built his new corporate strategy around two key priorities -- cash generation and cost cuts.

Colao, who took over from Arun Sarin in July, signaled loud and clear that Vodafone under his leadership will be a different company, and he set out his vision for leading a "simpler and much faster" organization. (See Colao Revamps Vodafone Team.)

The catalyst for the changes is, of course, the macro economic downturn that, in turn, is creating difficult market conditions for Vodafone (along with just about everyone else), particularly in Europe.

Those conditions have forced Vodafone to lower its revenue forecast for the full financial year (ending in March 2009) from £39.8 billion ($62 billion) to a range of £38.8 billion to £39.7 billion ($60.6 billion to $62 billion).

At the same time, Vodafone slightly increased its free cashflow outlook for the full year from between £5.1 billion ($7.9 billion) and £5.6 billion ($8.7 billion) to a new range of £5.2 billion ($8.1 billion) to £5.7 billion ($8.9 billion). (See Vodafone Wobbles on Outlook.)

The operator also announced a fresh assault on costs, with a plan to reduce operating expenses by £1 billion ($1.5 billion) per annum by the 2011 financial year, but it did not provide details on where those cuts will come from.

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