- UK operator Virgin Media O2 is reducing its headcount
- News had emerged earlier in the year that 800 jobs would go
- But that number has now grown to 2,000
- It adds to the woes of the UK telco sector, where Vodafone and BT are also cutting jobs
With fibre network rollout costs going up and customer numbers going down, UK operator Virgin Media O2 (VMO2) is to cut up to 2,000 jobs this year to reduce its operating expenses, the company confirmed today as it reported its second-quarter financials.
That’s a bigger number than was reported in June, when reports emerged of 800 job losses at the operator. But as the company pumps ever more capital into its fibre access network rollout and as its customer base shrinks, the company has decided to reduce its overall headcount by more than 10%.
“As we continue to integrate and transform as a company, we are currently consulting on proposals to simplify our operating model to better deliver for customers, which will see a reduction in some roles this year,” a VMO2 spokesman noted in a response to TelecomTV’s enquiries. “While we know any period of change can be difficult, we are committed to supporting all of our people and are working closely with the CWU [the Communication Workers Union] and Prospect along with our internal employee representatives as we have open and honest conversations on the future direction of our business,” he added.
The news adds to the woes of the UK telco sector. Earlier this year, Vodafone announced plans to cut 11,000 jobs over the next three years across its group operations (with some of those cuts hitting UK-based staff), while BT announced plans to reduce the size of its workforce by up to 55,000 roles by the end of the decade (and is also likely to shrink further as it revamps the R&D operations that are currently based at Adastral Park).
And as PP Foresight analyst Paolo Pescatore notes, there’s likely more to come.
“There’s no way of dressing this up. It is not good news for UK plc and we can expect to see further cost-cutting measures across the industry. Ultimately, it’s about efficiencies – all telcos are struggling to generate new forms of revenue [just as] margins continue to be squeezed due to the rollout of next-generation networks, and people are reluctant to spend more on connectivity… We’ve seen a correction in workforce [numbers] across all sectors, most notably in big tech. We are now starting to see this in other verticals – telco is not immune and with significant technological developments around the corner, this will further fuel job cuts,” noted the analyst, hinting strongly at the impact that greater AI-enabled automation is likely to have on staffing requirements.
And there could be another big hit if industry consolidation is allowed by the UK’s regulatory bodies. “Should the Vodafone UK and Three deal get the green light, it is highly likely we will see a reduction in the combined workforce. It is an unfortunate consequence of a merger,” added Pescatore.
News of the bigger-than-expected job cuts came as VMO2 reported its second-quarter financials, which showed that its broadband subscriber numbers had dipped by 15,300 during the three months to the end of June to 5.67 million following the implementation of price rises. The operator’s total mobile customer base (retail, wholesale and IoT) also dipped by more than 990,000 following the loss of a major wholesale customer, Lyca Mobile, to rival EE (part of the BT Group empire), though the company’s total number of mobile connections is still impressive at almost 44 million.
“As we navigate a tough economic climate, we have a clear long-term strategy and continue to deliver for customers,” stated VMO2’s CEO Lutz Schüler. “Amidst higher costs, rising usage and continued investment, we executed necessary price increases in line with our expectations, with the impact starting to flow through to our Q2 revenue and EBITDA [earnings before interest, tax, depreciation and amortisation] growth… For the remainder of the year we are focused on building commercial momentum, realising the synergies of the joint venture [with FTTP altnet Nexfibre] and future proofing our networks,” added Schüler.
Nexfibre is the UK wholesale fibre broadband network operator that is jointly owned by InfraVia Capital Partners (50%) and VMO2’s parent companies Liberty Global and Telefónica (with 25% each). It is building out its high-speed fibre-to-the-premises (FTTP) network, using XGS-PON technology, in areas not already covered by VMO2’s existing cable broadband network with the aim of passing 5 million UK premises by 2026 and ultimately reaching 7 million homes – it started building out its network late last year and passed an additional 175,500 premises during the second quarter, taking the total to somewhere around 300,000. VMO2 is Nexfibre’s anchor wholesale customer and is already offering commercial broadband services over the Nexfibre infrastructure in an unspecified number of towns and cities.
That network reach adds to VMO2’s already extensive high-speed cable broadband network, which VMO2 is now replacing with FTTP technology, with a view to being a fully fibre access player by 2028. With the additional premises passed by Nexfibre, VMO2 says it can now offer gigabit broadband services to 16.4 million premises across the UK.
But expanding and updating VMO2’s fixed broadband network, and investing in the continued rollout of 5G, is expensive and, along with all of its peers, VMO2 is seeking greater efficiencies, even as its revenues and margins edge up: For the second quarter of this year, VMO2 reported a 6.3% year-on-year increase in revenues to £2.7bn, while its EBITDA increased by 4.6% to just over £1bn. For the full details, check out the operator’s second-quarter statement here.
- Ray Le Maistre, Editorial Director, TelecomTV
