Virgin Media O2 UK Cuts 2,000 Jobs as Broadband Customers Fall UPDATE2

Broadband ISP and mobile giant Virgin Media and O2 (VMO2) have published their Q2 2023 results, which saw their fixed broadband base fall by -15,300 in the quarter to total 5,667,300 (vs 28.8k added in Q1) and the operator confirm earlier reports (here) of 2,000 job cuts. But they also accelerated their nextfibre FTTP reach by 175,500 premises.

Just to recap. Virgin Media finished their main network expansion programme at the end of 2022 and are instead focused on upgrading their older Hybrid Fibre Coax (HFC) network to support the latest XGS-PON powered Fibre-to-the-Premises (FTTP) infrastructure by 2028 (Project Mustang).

At the same time Telefónica, Liberty Global and InfraVia Capital Partners have separately created a new joint venture firm called nexfibre (here), which aims to deploy a separate open access full fibre network to reach “up to” 7 million UK homes in areas NOT currently served by VMO2 – starting with 5 million by 2026. Virgin Media is the anchor tenant ISP for this network and they’re already selling services over it (here).

In theory, this could push the combined VMO2 and nexfibre footprint to nearly 80% of the UK by 2028 (up to 23 million premises), which is roughly comparable with Openreach’s rival FTTP target (25m by Dec 2026). In relation to this, VMO2 has today reported that the nexfibre build added another 175,500 premises passed during Q2 (VMO2 + nexfibre combined now reaches 16.4 million Homes Serviceable).

Nexfibre Rollout Progress
Q2 2023 = 175,500 Premises
Q1 2023 = 107,800 Premises
Q4 2022 = 24,000 Premises

NOTE: A tiny portion of the above figures include a small bit of infill build for Virgin Media itself (separate to nexfibre).

Sadly, it’s not all good news, as VMO2 appears to have confirmed earlier expectations of job cuts, with 2,000 staff expected to be let go by the end of this year. The provider’s fixed broadband base also declined by -15,300 in the quarter – the first fall for a long time – and this has been attributed to the impact of their earlier price hikes and change in future pricing strategy (e.g. the adoption of the much maligned RPI + 3.9% model).

As for Mobile, the operator has now deployed 5G across more than 2,800 towns and cities (up from 2,100 in Q1), and they claim to still be on-track to deliver 5G services to over 50% of the outdoor UK population in 2023. But VMO2’s total mobile base also decreased by 991,300 connections in Q2 due to a reduction in wholesale connections caused by the migration of customers from one of their smaller MVNO partners (Lyca Mobile swapped from O2 to EE – here).

Quarterly UK Customer (Connection) Figures – Q2 2023
5,667,300 Fixed Broadband – (down from 5,682,600 in Q1)
43,955,600 Mobile inc. Wholesale – (down from 44,946,900)

On the financial front, VMO2 reported total transaction adjusted revenue of £2,710.3m in Q2 2023, which is up from £2,602.6m last quarter.

Lutz Schüler, CEO of Virgin Media O2, said:

“As we navigate a tough economic climate, we have a clear long-term strategy and continue to deliver for customers.

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 growth.

Demand for our award-winning connectivity remains, and our significant network investments and service improvements ensure we can meet all customer needs today while preparing for the decades ahead.

For the remainder of the year we are focused on building commercial momentum, realising the synergies of the Joint Venture and future proofing our networks.”

Sadly, the latest quarterly results did not contain any major new developments, such as updates on VMO2’s recently proposed £3bn acquisition of CityFibre (here). The results this time around were thus a bit of a mixed bag, with customer declines and job cuts headlining over a clear acceleration in their FTTP build via nexfibre.

Speaking of FTTP, VMO2 now states that their combined FTTP footprint (VM + nexfibre) reached 3 million homes at the end of Q2 (putting them roughly level with CityFibre), and is set to extend towards 4 million by the end of 2023. Finally, Virgin Media reported that the average download speed across their broadband base increased 34% year-on-year to 332Mbps at the end of Q2.

UPDATE 10:23am

Regarding the job cuts. The operator has pointed out that, since Virgin Media O2 came together in 2021, net headcount has broadly remained flat, and they’ve invested around £4bn in capex.

A Virgin Media O2 spokesperson said:

“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. ​

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 and Prospect along with our internal employee representatives as we have open and honest conversations on the future direction of our business.”​

UPDATE 1:10pm

We’ve had a comment from the CWU union.

Tracey Fussey, Communication Workers Union Assistant Secretary, said:

“This news is causing a tremendous deal of anxiety among our membership, who are now feeling vulnerable about their jobs during an historic economic crisis.

The confirmation of job losses is a tremendous disappointment, and we will be doing everything we can to mitigate against the redundancies.

The announcement of 2000 redundancies includes changes already made this year. We will continue to actively work with VMO2 through the consultation processes.

Workers deserve clarity and security over their futures, and the CWU will do everything in our power to ensure that is what our members will get.”