Vodafone was rocked on Tuesday by the surprise resignation of its Germany chief, Jens Schulte-Bockum, which coincided with the presentation of disappointingly weak numbers for Germany, Vodafone’s biggest national market.
Mr. Schulte-Bockum said the reasons for his departure were “very personal.” But even close colleagues were surprised by his move and no successor has been named, fuelling speculation that company headquarters in London wasn’t happy with him and that he decided to jump before he got pushed.
The former McKinsey consultant made the announcement in Düsseldorf at the annual results news conference for the 2014/15 fiscal year ending March 31. He said he was willing to stay on for an orderly transition.
Mr. Schulte-Bockum said the reasons for his departure were 'very personal.'
“I think we will soon see with the results we can hand over that the company in very good condition,” he said. At first glance, though, the figures don’t look quite as impressive as he claimed.
Earnings before interest, tax, depreciation and amortisation fell by 10.9 percent to €3.4 billion, or $3.8 billion, and total revenue was down 1.4 percent at €9.8 billion. Service revenue from mobile telephony was down around 3.5 percent, a smaller decline than the 6.2 percent drop the year before. Investment in long-term capital jumped 47.4 percent to €2.6 billion.
At Vodafone’s group news conference in London, Chief Executive Vittorio Colao didn’t mention the resignation until Handelsblatt asked him to comment. His answer betrayed his dissatisfaction with Vodafone’s performance in Germany.
“Jens’ resignation was his private decision,” Mr. Colao said, adding that there had been no fundamental differences between London and Düsseldorf and that Vodafone had “done nothing wrong.”
But then he said: “I think our German business needs more speed and intensity in implementing our management plans.” Those words spell out a rift between Mr. Schulte-Bockum and his bosses.
Vodafone's chief financial officer, Nick Read, echoed Mr. Colao, saying: “We have the right strategy in Germany but we’d like to speed up its implementation.”
Mr. Schulte-Bockum’s successor will have to strengthen sales and retune Vodafone’s public image. “We have a first-class network in Germany but many customers aren’t aware of that,” said one Vodafone executive who asked not to be named.
To make matters worse, rival Deutsche Telekom ate into Vodafone’s German market share in the last two quarters, which is bound to have annoyed an ambitious boss like Vittorio Colao.
Mr. Schulte-Bockum, who took over in October 2012 after running Vodafone’s Dutch business, said on Tuesday that Vodafone had lost customers due to poor cellphone coverage, claiming that investment in networks had been “criminally neglected” over years.
Under his command, the company had to catch up by investing billions of euros in modernizing its network, which had forced it to make savings. In addition to layoffs, Mr. Schulte-Bockum took the symbolic and unpopular step of cancelling the 2013 Christmas party.
Vodafone will develop positively in the coming years. And so will I. Jens Schulte-Bockum, Outgoing Chief Executive, Vodafone Deutschland
But that’s all over, said the outgoing chief executive. “I can’t imagine a scenario in which the company will face major restructuring waves. Vodafone will develop positively in the coming years. And so will I.”
In London, Vodafone’s share price fell as much as 3 percent, but that wasn’t just down to Mr. Schulte-Bockum’s bombshell. The group’s results showed that the company is losing ground to its competitors. Mr. Colao’s current-year forecast of earnings between 11.5 billion and 12 billion pounds, or $17.9 billion to $18.6 billion, fell short of analysts’ expectations averaging 11.9 billion pounds.
Vodafone has been hit hard by weak consumer spending in its European markets. Its predicted earnings growth, while short of analysts’ forecasts, would be the first core earnings rise on an organic basis after seven straight years of declines.
Mr. Colao put a gloss on the figures. “We returned to growth in the last quarter,” he said. “It’s not big growth but it’s the first in 11 quarters.”
Vodafone reported a rise in fourth-quarter organic service revenue of 0.1 percent, which followed 10 quarters of declines.
Group revenue fell 1.6 percent to 38.5 billion pounds in the 2014/2015 fiscal year and core operating earnings dropped almost 7 percent to 11.9 billion pounds. And there’s no swift improvement in sight.
Competitors, meanwhile, have been posting stronger earnings growth. Germany’s Deutsche Telekom, for example, trebled its net profit to €2.9 billion in 2014.
But Mr. Coloa said the the 0.1 percent rise in fourth-quarter revenue was a sign of light at the end of the tunnel for Vodafone’s struggling European business, which has been beset by price wars for years.
If that happens, Mr. Schulte-Bockum won’t be around to reap the benefits.