Virgin Media O2 outlines plans to lay off thousands as revenue falls

Telco expects to deliver cost savings of £800M by 2029, with £300M coming from staff cuts

Virgin Media O2 (VMO2) wants to chop a third of its labor costs and is expected to lay off thousands of workers, giving staff more to think about than Christmas presents during the run up to year-end. 

Shrinking the workforce is one of a number of cost reduction measures designed to save the UK's second largest telecoms provider some £800 million by 2029. 

It currently employs 16,000 people and redundancies will "equate to roughly 30 percent of the company’s total people costs" over the next two years, VMO2 said on Tuesday. 

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The majority of the redundancies will come from "non-customer facing roles," it claimed. The Register asked the telco to be more specific on the headcount cuts and the type of roles are at risk. 

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A spokesperson refused to provide a number, saying those plans are being finalized and consultations are due to take place. Logically, if more senior head office positions are hit then fewer people will need to leave to meet the £300 million ($402 million) target figure.

The Reg understands thousands of roles are at risk. 

Another lever management at VMO2 is pulling involves halting investment in any further fiber network upgrades beyond existing commitments. Instead, a low-cost upgrade will be deployed to its hybrid fiber-coaxial (HFC) network (i.e. cable customers) to bring 2 Gbps services to the majority of the network in 2027.

Full fiber merger pledges

VMO2 was formed in 2021 by the merger of broadband and TV biz Virgin Media and mobile operator O2. The pair pledged to spend £10 billion (c $13.4 billion) on beefing up 5G coverage and laying gigabit "full-fiber" fixed-line networks.

Both Virgin Media and O2 talked up those connectivity commitments when justifying the case to combine their businesses, saying they needed greater economies of scale to compete with their rivals. 

However, business has not gone as planned, with revenue falling over several successive quarters. The latest figures for Q3 ended September 30 show total revenue down 5.7 percent year-on-year to £2.43 billion. The networks giant blamed consumer fixed market pressures, among other things.

VM02 forecasts a revenue decline of 3 to 5 percent for the whole of 2026.

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In the consumer division, VMO2 talked of more clearly defining the role for each of its brands. O2 Business is planning to streamline the product portfolio. 

Tom Oughton, senior analyst at Megabuyte, said the changes were expected.

"VMO2 has undergone a strategic review as it looks to address rising leverage, with today confirming a transformation program to ultimately bring c. £800 million ($1bn) in cost savings ahead of its first debt expiry in 2029. The routes to achieve this are the most obvious ones: reduce capex on full fiber and focus on HFC upgrade (lower cost, quick payback) and reduce operational costs by cutting headcount," Oughton said.

"The obvious question is how a significant transformation will impact the business. VMO2 focuses on the benefits, but the business is declining 3-5 percent organically with 16-17k staff, so reducing headcount by 25 percent or more could stretch operations, worsen customer support, and cause broader disruption."

Paolo Pescatore, founder and analyst at PP Foresight didn't mince his words either: "Virgin Media O2 is in serious trouble, with customer losses and declining service revenue and earnings exposing the scale of the challenge."

 "The business has lost its strategic direction, and continued customer departures suggest it is struggling to rebuild trust while rivals give people compelling reasons to switch. Cutting costs can buy time, but it cannot repair those relationships or compensate for weak execution," Pescatore added.

"Management must show customers why they should join and stay; otherwise, it risks shrinking the business without fixing what is driving people away. Shareholders need to take a hard look at these businesses and make even tougher choices about their future."

Noel McClean, deputy general secretary of Prospect union, said the job cuts "will be devastating for those directly affected and will of course have an impact on colleagues remaining in the business.

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"Industry conditions are tough but this level of cuts will drastically alter the way VMO2 works." ®