Vodafone has warned of price rises for UK customers and job cuts as the telecoms company launched a €1bn-plus (£879m) cost cutting plan to cope with soaring energy bills and inflation.
It said consumers would have to accept higher bills as it could not cover all its cost increases through a new multi-year cuts plan. It also lowered annual profit guidance in light of a €300m year on year rise in energy costs across the business.
“We can take cost action, you can see we are doing that but price has to play a role in order to have sustainability in the investments [in telecoms infrastructure] we make,” the Vodafone chief executive, Nick Read, said.
“There is a significant impact on energy and inflation [costs] as seen by lowering our guidance. Price is a key component of what we do, like every other sector. We are talking £1 or £2 a month on every bill. You can draw comparisons to mortgages or filling a tank of fuel for a car and I would say what we offer is tremendous value.”
Read said the company was raising prices in 11 of its 12 European markets, including the UK, where customers’ bills will go up annually by the rate of inflation as measured by the consumer prices index in January, plus 3.9%.
This means Vodafone, which has about 18 million mobile customers in the UK, will be raising bills by about 14% when the mid-contract price increases are implemented next spring.
Read said the other form of bill increases is known as “re-pricing”, under which customers are charged more in return for offers for additional data or services.
Companies including Vodafone and BT have been criticised for making billions from the above-inflation rises and the telecoms regulator Ofcom – which has said a record 8 million households have experienced difficulty paying their bills – has told internet companies to “think hard” about continuing to make large hikes.
Labour has said that if it is elected there will be a crackdown on mid-contract price increases, pointing out that broadband and mobile are the only utility sectors in which they are allowed. In sectors such as energy and gas suppliers cannot increase prices mid-contract unless there is a change in VAT rates.
Vodafone, which employs about 95,000 staff globally and 9,000 in the UK, said its cuts plan aims to “streamline and simplify our group-wide structure and further accelerate the digitalisation of our operations”.
Read would not be drawn on the level of job losses or from which markets or divisions they will primarily come, but he said some areas such as software services would receive an increase in headcount.
Asked about ongoing talks to merge Vodafone and Three – the UK’s third and fourth biggest mobile operators respectively – Read said that if a deal were reached it would need to be cleared by regulators to allow the companies to compete against their rivals BT, Virgin Media 02 and Sky.
A tie-up would catapult the newly combined company above their rival mobile networks EE and O2, with more than 27 million subscribers.
“We need industrial scale at infrastructure level to compete with BT, Virgin 02 and Sky,” Read said. “This potential merger will not impact pricing in the market. If we remain sub-scale and returns remain where they are, we will not be able to pace the investments of the bigger players in the market.”
Earlier this month, BT warned of job cuts after it was forced to find more than £500m in additional savings as its energy bill would be £200m higher this year.
