Virgin Media O2 Ponders UK Cost Cutting to Tackle £22bn Debt Mountain
Multiple news reports appear to be indicating that the owners of UK broadband, mobile and TV provider Virgin Media (O2), Telefónica and Liberty Global, may need to execute a significant round of cost-cutting (e.g. job cuts, reducing capital expenditure and cutting dividends etc.) in order to get the company’s £22bn debt mountain under control.
The latest situation appears to have been triggered, at least in part, after the price of Virgin Media and O2’s c.£1.1bn of senior unsecured debt plummeted over the past few weeks (one $925mn bond fell as low as 57 cents on the dollar), which has also coincided with soft earnings (i.e. customer losses to rival networks) and the £2bn deal – supported by InfraVia Capital – to buy alternative full fibre broadband network Netomnia (it’s feared this may further squeeze free cash flow); the latter agreement is currently going through a fast-tracked competition review (here).
In short, investors appear to have become much more worried that they might not get all of their money back, which tends to increase the risk associated with debt held by the company (i.e. issuing new bonds and refinancing existing debt becomes more expensive and difficult). According to the FT (paywall), VMO2’s safer senior secured bonds are also being said to have “fallen sharply” (i.e. the price of a $1.4bn note reached 76 cents, down from 92 cents in early 2026). A similar story also cropped up on TelcoTitans.
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The situation appears to increase the possibility that Liberty Global might need to go through a similar strategic review and bout of restructuring as co-parent Telefónica did this last year (here).
Michael Fries, Liberty Global CEO, said last Friday:
“Finally, just a word on our capital structure in the UK … The most important message I want you to hear from me is that both Liberty and Telefónica are completely aligned on our commitment to this business long term. While we appreciate that leverage today exceeds our original targets and as a result of slower growth in our decision to reinvest more in our networks, I would urge you to remember that we have many tools at our disposal if necessary, both organic and inorganic to drive greater free cash flow, stronger operating performance and lower leverage over time.”
At present it’s too early to say how big any cuts to the business might be, although VMO2 currently claims to have around 16,000 employees in the UK (inc. engineers that also work as the build engine for nexfibre) and that number could potentially be reduced in the future. VMO2 have also been making greater use of AI to improve service features, but we could now see that accelerate in other areas to help cut costs and partly offset any reduction in workers.
At this point it’s worth noting that some of the recent fall in VMO2’s consumer broadband base is seasonal, which at least partly reflects the return of students coming home for summer and ending their special contracts. In that sense it’s possible we might see a recovery on this front in the next set of results, but that won’t be enough to completely correct for the wider concerns with the business.
Suffice to say that VMO2 will be looking to cut costs in the near future and this may also dampen their appetite for making further big consolidation deals like the one they’re still trying to complete with Netomnia.
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Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook, BlueSky, Threads.net and Linkedin.
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I’m curious how much of an impact their door to door salesman have?
Even if I wanted to sign up to VM, I doubt I’d ever go with a door to door salesman considering the issues I’ve heard about them over the years and how annoying they can be.
£25k a year, plus car, plus hotels, plus massive bonuses and load of them are dodgy as bugger.
I’d get rid of them first and concentrate on retention and pricing.
I know a way to save £2bn straight away…….
What would that be Dave? 😉
Cutting the execs inflated salaries may help give a chunk back, improve customer service and empower staff to make decisions to reduce churn rate and reduce number of expensive incentives to get new customers, actually make FTTP upgraded areas where HFC is, orderable by customers new and existing (HFC).
No, lets go back to cutting staff instead, makes management look like they are doing something.
I was thinking more along the Netomnia lines…
I find it amazing that a company famed for it’s appalling customer service could be up to its neck in debt. How on earth could that be? The other problem is that its Pay TV model (and Sky’s for that matter) is rapidly being superseded by streaming services that doesn’t need costly hardware & engineers to make work.
I was thinking the same thing. Pushes that they are only buying to remove competition more too.
That said if you’ve tried to get full fibre in a mustang area then that is not showing the cheap smooth upgrade path VMO2 might have had you believe.
Been trying to sort for a relative, second visit they’ve got the fibre to the house now, but now two weeks before they come to do the final internal install. The external work is VMO2 not Kellys and the team didn’t even know where the new fibre cabs were!
Unfortunately it’s a very ageing network with very little investment given to maintain or improve it.
Most of the original leadership and experience of this industry has already left leaving inexperienced people managers and accountants to run the business. Decision making flip flops in each business qtr so there is no medium to long term strategy.
The O2 JV was just pure toxic.
Recent OFCOM findings (and fine) show awkward consumer policy with the brand license a few years to go they will have to call it the company another name.
No way would Virgin Management licence there brand to this outfit now.
NTL called it a day with £14bn of debt so VMO2 are likely to run out of steam at £22bn+ of loans.
Must be giving John and Mike a bit of a headache on how to offload the business.
It’s too big, needs eye watering amount of investment and debt weight is way to high. A hard business to sell for sure.
I wonder how much they’ve given their shareholders while they were building that massive debt pile
I left Virgin Media as found there service unreliable for loading webpages. Often needing to hit refresh. Have switched to OneStream using OpenReach and the difference is day and nigh. Webpages open first time. Virgin media was grate for downloads, but for responsiveness in every day tasks Open Reach trumps them. Also OneStream where grate helping me setup my router, talking me through the steps on the phone.