Virgin Media O2 is cutting up to a quarter of its 16,000 UK staff and announcing £800m in cost savings as the telecommunications company battles mounting losses and a £22bn debt pile. Mike Fries, chief executive of Liberty Global, the company's co-owner, said the situation was not a crisis, though industry observers have questioned what has gone wrong at the business, which provides broadband, TV, landline and mobile services.
The company has lost 182,000 broadband and 644,000 mobile customers over the past two years, according to Enders Analysis, even though overall customer numbers remain higher than before the £31bn merger between Liberty Global and Telefónica five years ago that created the combined entity. The cost-cutting measures also include abandoning plans to upgrade its cable network to full fibre. A potential refinancing of the debt pile is expected next year.
Virgin Media O2 operates in an increasingly crowded market facing around 100 alternative network providers laying fibre alongside BT's push to replace its ageing copper infrastructure. This competition has kept prices low and pressured profitability and revenues. Industry sources point to operational execution problems across marketing, pricing, customer service, IT and billing rather than market conditions alone. The company was fined a record £28m by telecoms regulator Ofcom in July after an investigation found millions of customer calls between January 2022 and September 2024 were probably mishandled, with the regulator finding Virgin Media used deliberate tactics to prevent contract cancellations.
Recent missteps included a 40% surprise monthly bill increase for O2 mobile customers in 2024, which resulted in around 110,000 customer losses and drew criticism from then-chancellor Rachel Reeves. However, Ofcom's latest data showed significant reductions in complaints across the business, with Virgin Media achieving the lowest complaint rate of any leading broadband provider. Virgin Media O2 has invested £11bn in the UK since the merger and is expected to generate £200m in free cashflow this year, with profit margins rising from around 34% to just over 40%.
The company has paid £5bn in dividends to shareholders since the merger, according to filings. As part of its strategy, Virgin Media O2 is negotiating a potential deal with BT to use Openreach to extend its footprint from 19m to up to 25m homes. The announcement came as Virgin Media O2 lashed out at recent regulatory decisions, including the fast-tracking of BT's £400m rescue of TalkTalk and signals that the competition regulator may block the £2bn takeover of altnet Netomnia by Nexfibre.
For UK households and businesses, Virgin Media O2's difficulties mean continued pricing pressure in an increasingly competitive market, though service quality improvements appear to be underway following recent customer complaints.