New Vodafone boss Margherita Della Valle said she would cut 11,000 jobs globally over three years to help the telecom group regain its competitive edge after it warned a poor performance in its biggest market Germany would hit cash flow.

Shares in Vodafone, which has underperformed rivals in its major European markets, fell to their lowest level since 2002, and were trading down 9% by midafternoon.

The job cuts are the biggest in the history of Vodafone, which employs 90,000 people directly across Europe and Africa.

Della Valle was tasked with turning Vodafone around when she permanently took on the top job from the role of CFO last month. Three major shareholders could all benefit from a break up of the group.

“To consistently deliver, Vodafone must change,” she said.

“My priorities are customers, simplicity and growth.”

Della Valle targeted Vodafone's central operations when she took the helm at the start of the year, with 500 job cuts. In Germany 1,300 roles will be lost, the company said in March, while 1,000 are being shed in Italy.

The additional cuts announced on Tuesday will be spread across its European markets, as well as more reductions in the centre, she told reporters.

Germany, Vodafone's biggest market, was underperforming, Della Valle said, while “structural change”, meaning a full or partial sale, was an option in Spain.

Tuesday's share price fall was probably due to its forecast of €3.3bn (R68bn) of cash flow this financial year, down from €4.8bn in the year to end-March 2023, she said. Analysts had expected €3.6bn.

The CEO put the lower forecast down to the timing of payments for cable TV in Germany due to a change in the law.

One large institutional investor said there remained material portfolio value within Vodafone which the results did not substantially change.

The dividend remained well covered, the investor told Reuters, but there was perhaps greater pressure to realise some of the potential steps to unlock the group's value.

Vodafone's dividend was a matter for the board, Della Valle said, but pointed to a “significant” cut in debt and said the group was comfortable with its leverage. The yield exceeded 10% on Tuesday.

“The new CEO has decided to maintain its dividend (a missed opportunity in our view and a concern the company remains unwilling to take necessary bolder action,” analysts at JPMorgan Cazenove said.

Vodafone reported a 1.3% decline in group core earnings to €14.7bn for the year, missing its own guidance.

Della Valle said the European telecom market had long delivered a poor return on the capital invested in networks, but Vodafone's relative performance had worsened over time.

Activist investors and rivals have also described the British group as unwieldy and slow to respond to market changes.

Emirati telecom firm Etisalat has built up a 14.6% stake and French telecom billionaire Xavier Niel, who competes with it in Italy, and Liberty Global, its partner in the Netherlands, are also investors.

Analysts have said all three are positioned for any sale of Vodafone's operations.

Setting out her road map, Della Valle said she would maximise the potential of business customers, a long-standing Vodafone strength, while focusing on the basics, such as customer service, for consumers.

Della Valle's predecessor Nick Read, who stepped down in December amid investor frustration, had said consolidation was needed in major markets like Britain, where Vodafone has been in talks with rival Hutchison's Three UK for at least nine months.

Vodafone said on Tuesday there could be no certainty any transaction would ultimately be agreed.

“It will take as long as it takes to get a good deal,” Della Valle told reporters.

Reuters