Virgin Media O2 is preparing thousands of job cuts and pulling back on fibre expansion as competition squeezes its British broadband business.
According to Reuters, the outfit wants to save £800 million (€957 million) by 2029, cutting approximately 30 per cent of its wage bill. Most reductions will affect roles outside customer service. That figure concerns employment costs, so it does not establish that exactly 30 per cent of its 15,000 staff will lose their jobs.
The Liberty Global and Telefonica joint venture is facing pressure from BT’s expanding fibre network and smaller operators offering cheaper, faster connections.
Virgin Media O2 is exploring wholesale access to another operator’s infrastructure, potentially joining Sky and Vodafone in using BT’s Openreach network. Building your own broadband empire apparently becomes less appealing when somebody sends the bill.
Virgin Media O2 chief executive Lutz Schüler blamed difficult market conditions, the regulatory environment and technological change for the restructuring.
The latest results illustrate the squeeze. Virgin Media O2 lost 23,300 fixed-line customers during the third quarter, leaving it with 5.5 million.
Revenue fell 5.7 per cent to £2.4 billion (€2.87 billion), while adjusted core earnings declined 2.6 per cent to £995 million (€1.19 billion).
The company had planned to upgrade its cable network to fibre and extend its reach by acquiring Netomnia, one of Britain’s largest alternative network operators.
However, Britain’s competition regulator opposed that deal last month. Nexfibre, owned by Virgin Media O2’s parent companies and investment firm InfraVia, plans to challenge the regulator’s reasoning.
Virgin Media O2 argues that market economics cannot support “three overlapping fibre networks”. Competition is evidently more enjoyable when it happens to somebody else. Instead, it will upgrade its existing cable infrastructure to deliver 2Gbps services to most customers next year.
“Where any future fibre investment makes strategic sense, it will be supported off-balance sheet and only in non-altnet areas,” the company said.
