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Virgin Media O2 is targeting £800m in annual cost savings by 2029, including major job cuts, as falling revenues, subscriber losses and tough fiber economics force a strategic reset and pull back from further network upgrades.
In summary – what to know:
£800m in savings – VMO2 expects to save £800m annually by 2029, with around £300m coming from workforce reductions and £400m in savings during 2027.
Hold on to full fiber – VMO2 will continue to stop full fiber upgrades across its network, instead relying on HFC upgrades to deliver 2Gbps to most remaining premises by 2027.
Portfolio cuts – Consumer and B2B portfolios will be simplified, while mobile investment continues and O2 Business targets £70m in annual merger synergies by 2030.
Virgin Media O2 is to cut £800 million a year from its operating costs in the UK by 2029, with as much as £400 million to cut through next year (2027). About £300 million of the 2029 run-rate, about 37 percent of its total cuts, will come from redundancies, according to reports. These will reduce its wage bill by about 30 percent over two years, apparently — and are as much as “25 percent” of its total workforce, of about 16,000, according to reports.
The company, owned by Liberty Global and Telefónica, posted a grim set of third-quarter scores. Income fell 5.7 percent to £ 2.4 billion, versus the same period in 2025; Service revenue was down 3.5 percent to £2 billion; Adjusted EBITDA was down 2.6 percent to £995 million. It was £197.3 million out of pocket for adjusted free cash flow. It terminated 22,100 broadband connections, respectively 7,800 and 19,500 consumer and business subscribers.
Customer-facing service departments will be the least affected by the round of cuts, it seems – “most reductions” will be elsewhere, it said. The company has reduced its senior headcount since the summer, it said, including by combining commercial and operational areas under Lyssa McGowan, chief executive of its consumer business. It aims to “remove duplication and layers that slow down decision-making and dilute focus”.
Other significant cost measures include reducing the use of contractors, simplifying supplier relationships and supply chains, and reviewing technology licenses. Instead, it will make “greater use” of AI tools in digital channels — notably in customer service, network planning, error management, and personalized sales and marketing offerings — to “drive efficiency, productivity and better customer experience,” it said.
Further details of the plan will be provided with its full-year results, beginning in 2027. They include a “stop” on fiber upgrades over its existing commitments. It said: “Market economies do not support three overlapping fiber networks, and the company’s HFC network will continue to deliver market-leading broadband at scale, with a low-cost upgrade being phased in to bring 2Gbps services to the majority of the network in 2027.”
The ‘overlapping’ networks, here, refer to BT’s Openreach network and various ‘alternative’ fiber (altnet) footprints – such as CityFibre, Community Fibre, Hyperoptic, Gigaclear, Netomnia – in addition to its own hybrid fiber-coaxial (HFC) network, which uses fiber to cabinets and coaxial to homes, and its fexn fiber. Liberty Global and Telefonica together have a 50 percent stake in Nexfibre; Investor InfraVia Capital Partners owns the rest.
It is halting capital investment and full fiber upgrades for the rest (about 50 percent) of its network. Parts that have not transitioned to full fiber will be upgraded to 2Gbps speeds by the end of 2027. It said: “Where any future fiber investment makes strategic sense, it will be supported off-balance sheet and only in non-altnet areas.” It will consider wholesale deals to expand services to “off-net” areas not covered by Virgin Media O2 or Nexfibre.
Earlier this month, Virgin Media O2 hit out at the Competition and Markets Authority’s (CMA) decision to fast-track BT’s £400m rescue of TalkTalk – after raising concerns about a “logical deal” for Nexfibre to acquire Netomnia for a fee of £2bn. The CMA said its preference is for Netomnia to be acquired by CityFibre – to create a stronger third challenger to Openreach.
In contrast, Virgin Media’s plans do not appear to affect its mobile network. It will “continue to invest”, it said, with a “focus on reliability and quality”, and plans to expand its 5G Advanced infrastructure, and invest in its satellite service with SpaceX’s Starlink D2D service. It references the use of AI tools, and its network sharing deal with Vodafone – “to ensure efficiency, and the deployment of acquired spectrum, which takes the company’s share to around 30 percent”.
However, there are some brand and portfolio changes. It has outlined a “more clearly defined role” for its consumer brands and a “simplified … proposition line-up”. Its O2 business portfolio will also see fewer products as the unit continues to integrate its old Virgin Media and (Telefónica) O2 departments. It targets around £70 million in annual pre-tax synergies by 2030, through reduced complexity and better execution and margins.
More wholesale/MVNO deals are on the cards, it seems.
Paolo Pescatore, telecommunications analyst at PP Foresight, reflected: “This feels like a last dice to rebuild trust. Simplification is over, but the scale of the changes raises uncomfortable questions about what the merger has delivered. Employees now have the consequences of a business that is still looking for sustainable growth, but that is sustainable understanding in search of sustainable growth. at risk weakening the differentiation over time.
“Clearer roles for Virgin Media, O2 and Giffgaff must translate into compelling offers, stronger loyalty and fewer reasons to leave. Customer service is improving, with Virgin Media recording the lowest broadband complaint rate among the major providers in Ofcom’s latest data. Protecting these profits through deep cuts will be crucial. A low cost plan and Liberty’s growth plan must be crucial. Little if customers and revenues continue to shrink.”
Lutz Schüler, chief executive at Virgin Media O2, commented: “The direction we are setting today paves the way for the next chapter of Virgin Media O2: a company that will be leaner, clearer about priorities, and faster in delivery, with brilliant brands and an unwavering focus to return to what really makes a difference for our customers. across all areas of the economy sitting, standing still and doing what we have always done is not an option and if many of these Decisions are difficult, they are necessary for our future success and growth.
“While we will give a fuller update on the new strategic plan in the coming months, we are already making progress and making difficult decisions to prioritize investments and reduce costs, which include the size of our workforce. This is not something I take lightly, but my commitment to our people is that for those who leave, we will treat them fairly and with respect, and for those who remain, we will work differently, but as a team to return to the media and win, and to regain the virgin, the necessary action to do so begins now.