Virgin Media O2 plans £800m savings and major job cuts

Virgin Media O2 announced plans to cut thousands of jobs as part of an £800 million annual cost-saving target aimed at reducing the company's £22 billion debt pile. The telecommunications provider, jointly owned by Liberty Global and Telefónica, stated that £300 million of the total savings will come from reducing the workforce.

The company indicated that the wage bill will decrease by 30% over the next two years. While Virgin Media O2 did not specify the exact number of positions to be eliminated, the reduction could affect up to 25% of its 16,000 employees. Management said most of the job losses will occur in non-customer-facing roles.

Lutz Schüler, the chief executive of Virgin Media O2, said the firm is making difficult decisions to prioritize investments and reduce costs. "Standing still and doing what we’ve always done is not an option and while many of these decisions are tough, they are necessary for our future success and growth," Schüler said. He added that the company must evolve and that the actions required to achieve that start immediately.

The cost-cutting measures extend beyond headcount reductions. The company plans to lower expenses by using fewer contractors and reviewing existing supplier and supply chain contracts. These changes are part of a broader strategy to save £800 million annually by 2029.

Virgin Media O2 also announced it will stop investing in upgrading its network to full fibre beyond commitments already made to partners. The full fibre rollout is currently 50% complete. Instead, the company will implement a lower-cost upgrade to improve speeds on the remaining network. Most homes not yet on full fibre will reach 2Gbps speeds by the end of next year.

The firm is exploring wholesale agreements to extend its service area to locations where its own network does not reach. This follows reports that Virgin Media O2 is close to a deal with BT’s Openreach. Such a partnership could expand the company's footprint from 19 million to potentially 25 million homes.

The company said it is reviewing its cash distributions to shareholders, suggesting a potential reduction in its dividend this year. Virgin Media O2 expects to incur £250 million in restructuring costs associated with these changes.

The announcement coincided with the release of quarterly results for the period ending in September. The company reported a loss of 23,300 broadband customers and 7,800 consumer mobile customers during that quarter.

Schüler described the new direction as a step toward a leaner company with clearer priorities and faster delivery. The financial results and restructuring plans were revealed at a time of heightened industry activity. Earlier this month, Virgin Media O2 criticized the fast-tracked £400 million rescue of TalkTalk by BT. Simultaneously, the UK competition regulator indicated it might block the £2 billion takeover of Netomnia by Nexfibre, a move that could affect Virgin Media O2's parent companies.

The Competition and Markets Authority expressed a preference for Netomnia to be acquired by CityFibre to strengthen the competitive position against Openreach. However, the regulator noted that Netomnia carries a substantial debt load and is currently in restructuring talks with lenders. Separately, O2 signed a naming rights deal for the London venue, securing the name through at least 2038 in a contract valued at approximately £200 million.