Virgin Media O2 slashes workforce and pauses fiber buildout

Virgin Media O2 is restructuring its operations to reduce an £800m annual cost target, a move that includes cutting its employee wage bill by 30% over the next two years. The telecommunications provider, which is jointly owned by Liberty Global and Telefónica, announced these measures today while revealing that its debt has reached £22bn.

The company stated that £300m of the total savings will come from job reductions. Although it did not specify the exact number of roles affected, the cuts could impact up to 25% of its 16,000 staff members. Virgin Media O2 said that most of these departures will occur in non-customer facing positions. The firm plans to increase its use of artificial intelligence tools in customer service, network planning, and fault management to support the transition.

In October, Virgin Media O2 criticized the fast-tracked £400m rescue of TalkTalk by BT. At the same time, the UK competition regulator signaled that it might block the £2bn takeover of Netomnia by Nexfibre, an entity whose investors include Liberty Global and Telefónica. The Competition and Markets Authority has expressed a preference for Netomnia to be acquired by CityFibre to create a stronger third challenger to Openreach.

The cost-cutting plan also involves reducing the use of contractors and reviewing supply chain contracts. To lower capital expenditure, the company will stop investing in full fiber upgrades beyond its existing partner commitments. The full fiber build is currently 50% complete. Instead, Virgin Media O2 will implement a lower-cost upgrade that will raise speeds to 2Gbps for most of the network not yet transitioned to full fiber by the end of next year.

The carrier is also exploring wholesale deals to expand its reach beyond its current network coverage. It confirmed reports that it is close to a deal with BT's Openreach. This agreement would extend its footprint from 19m to potentially 25m homes. Additionally, the company is reviewing options for cash distributions to shareholders, suggesting a potential reduction in its dividend.

Virgin Media O2 expects to incur £250m in restructuring costs as it implements these changes. Lutz Schüler, the chief executive, said the company is making difficult decisions to prioritize investments. "Standing still and doing what we’ve always done is not an option," he said. "Virgin Media O2 must evolve, and the action needed to make that happen starts now."

The announcement accompanied the company's latest financial results for the quarter ending in September. Virgin Media O2 reported a loss of 23,300 broadband customers and 7,800 consumer mobile customers during that period. The company said the new strategy will make it leaner and faster in delivery. "The direction we’re setting today paves the way for the next chapter of Virgin Media O2," Schüler added.