Shareholders of Virgin Media O2 UK reportedly target £600m in cost cuts
The owners of UK broadband, mobile and TV provider Virgin Media (O2), Telefónica and Liberty Global, are reportedly set to move forward with earlier proposals for a significant round of cost-cutting (i.e. a mix of job cuts and reducing capital expenditure) and are reportedly aiming to calm investors by cutting c.£600m.
As we reported in July 2026, the situation was partly triggered after the price of Virgin Media and O2’s c.£1.1bn of senior unsecured debt plummeted (at the time one $925mn bond fell as low as 57 cents on the dollar), which had also coincided with softer earnings (i.e. customer losses to rival networks) and the £2bn deal – supported by InfraVia Capital – to buy full fibre broadband altnet Netomnia, which squeezed free cash flow. The latter deal is currently going through a fast-tracked competition review (here).
In short, investors were growing increasingly concerned about VMO2’s ability to service its £22bn debt mountain, which inevitably ends up increase the risk associated with such debts (i.e. issuing new bonds and refinancing existing debt becomes more expensive and difficult). Reports at the time indicated that even VMO2’s safer senior secured bonds had also “fallen sharply”.
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According to a new FT report (paywall), Liberty Global and Telefónica are allegedly preparing to present a proposal that would require Virgin Media and O2 to find around £600m in cost cuts across the business, which seems likely to result in a round of job cuts and a reduction in capital expenditure. The latter could be particularly tricky as VMO2 currently needs to invest in order to keep its network and services competitive, as well as to potentially fund further altnet acquisitions.
The previous report also indicated that VMO2 might need to cut its £200m dividend, although it’s unclear if that is still on the table. At present a formal proposal has yet to be put to VMO2, although this is expected to follow soon. None of the parties involved agreed to comment, although the CEO of Liberty Global did previously acknowledge the situation:
Michael Fries, Liberty Global CEO, said in July:
“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.”
We should point out that back in March 2026 the CEO of Liberty Global, Mike Fries, also suggested that if the merger with Netomnia ended up being blocked by the Competition and Markets Authority (CMA) then they could stop rolling out new full fibre broadband networks.
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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£22bn is more or less on par with BT group despite only having about half the coverage and less than the customers (BT & other ISPs using Openreach). Not good.
Yes, tables have turned. BT now the more successful company because VMO2 took too long to modernise from copper coax to FTTP. That pause to Nexfibre/Mustang whilst VMO2 deliberated their strategy made things worse and delayed rollout a lot. Had they got their finger out, they would not have to spend so much money on Netomnia aquisition, which has to be more expensive than doing their own in terms of just the purchase costs, and then add PIA costs and Netomnia uses that.
There was Mustang/FibreUp pause. VMO2 aren’t paying for Netomnia.
VMO2’s loss isn’t because of the pace of the FTTP overbuild, it’s because fewer and fewer people care about cable TV and they have more competition for Internet access at lower prices. Having been the only ones offering faster than FTTC for so long that takes a toll.
@FANNY ADAMS, but Virgin have had faster speeds before Openreach, even with the old tech, people don’t care how they get their broadband as long as it is reliable.
I agree with Polish Poler, Cable TV is not a thing these days- more choices.
VM were offering GIG1 with Vm for £23.99 a month with £300 early switching credit available. That offer is still on via uswitch.com and has been for quite a while now. GIG1 from their own web site is £27.99 (without Netflix and TV) today. Price on VM for new customers is competitive, but existing get milked unless they can haggle well and get an agent who’s quota is not filled up with maximum discounts for the week.
Most people aware that fibre to the home is exactly that, and that Virgin’s isn’t true fibre for those that live in areas where they can see coax or already have coax cable PLUS the headache with issues that are so common like SNR/Noise Ingress, rubbish hubs with rubbish WIFI – it all adds up. And people can sign up with ISPs who don’t have yearly inflation busting price hikes on Openreach too.
This is the Fanny here, actually complimenting BT’s roll out at expense of VM who have taken so long to upgrade their copper. I’ve seen swathes going to BT or an ALTNET in my area – you can tell by the CSP and fibre lines attached to houses and see the old Virgin coax box entry. The BT roll out has enabled people who were stuck with coax VM because only other choice was deadpan FTTC, the latter being considerably slower than VM on downstream and upstream even in houses that were near the FFTC cabinet.
They ignored existing copper customers and rolled out fibre via Nexfibre to areas that already had one or more (often mature) FTTP providers.
Now their copper customers have more choice from Openreach and others and people are switching away. As someone pointed out, fewer people care about cable or satellite TV these days, instead opting to get their TV fix over an internet pipe.
If they had worked on upgrading their existing copper customers first, they might have been able to hold on to more of their existing customer base but now the ship has sailed. A reputation of poor customer service, high renewal prices, no choice of ISP and the fact that they lost their ‘speed’ advantage means customers are simply abandoning them.
@Fanny Adams; VM employees don’t have a discount quota. Their bonus is revenue based, so they get a bonus for keeping people paying more than they were paying before the call which is why you tend to always get bad discounts unless the one person who doesn’t care. But with the recent layoffs there’s very few who do it now because it’s part of how they figure out layoffs.
“£22bn is more or less on par with BT group despite only having about half the coverage and less than the customers (BT & other ISPs using Openreach)”
Actually VMO2 is a much worse position than BT, £4.2 Billion of BT’s reported Net Debt is Lease Liabilities:
BT Group
Headline Net Debt £20.0 billion
Lease Liabilities £4.2 billion
Net Financial Debt £15.8 billion
Adjusted Net Financial Leverage 2.3x
Virgin Media O2 (VMO2)
Headline Net Debt £22.1 billion
Lease Liabilities £0.6 billion
Net Financial Debt £21.5 billion
Adjusted Net Financial Leverage 5.7x
VMO2’s Debt position is far worse than BT’s, but the market media largely ignores it because VMO2 isn’t a publicly traded company.
‘Most people aware that fibre to the home is exactly that, and that Virgin’s isn’t true fibre for those that live in areas where they can see coax or already have coax cable PLUS the headache with issues that are so common like SNR/Noise Ingress’
There have been tons of stories here and elsewhere regarding people thinking they have ‘fibre’ when it’s hybrid fibre. SNR issues aren’t ‘so common’ they impact service in most areas. People don’t post online to say things are working fine as a general rule.
A lot of people simply call their Internet connection their ‘WiFi’. They couldn’t care less how it gets into their home.
The recent much lower prices are an attempt to stem the losses. Before that VM were far more expensive as you know.
Jeremy Chelot personally said that VM customers were easier to churn mostly because they’d already allowed someone to dig a new cable to their home and drill through their wall once so were more willing to allow it again. Nothing to do with coax, etc.
Still what does he know?
I can recommend one non-employee related cost saving measure.
Cease the “Virgin” brand licensing arrangement with the main Virgin group, and rebrand (maybe to just “o2”, or revert to older brand like mmO2).
Yes a bit of money upfront to execute the rebrand to erase the Virgin Media name, but long term payback, as the “Virgin” brand no longer adds any value in my opinion.
And you get the Windscale effect where all of the bad press goes away. At least with those with short memories.
I suspect a lot of the cost if just staffing and running Virgin Media as an ISP function. Wholesale the network properly (not just GiffGaff). The amount of hubs that get sent as replacement whenever there is an issue, which doesn’t actually fix the underlying issue is staggering. The same as for when there were issues with the Stream/Flex box. Instead of being able to recognise a firmware issue they just sent another box out. Granted, they should get one returned, but it’s all processing cost and refurbishment cost. Also, the amount of free wifi pods given out should be stopped. If they had a decent hub to start with, WIFI coverage wouldn’t be so poor. At least make a minimal charge to cover it, or only provide one free of charge. Bad procedures ahve also ended up costing them money because of compensation or legal cases when they could have resolved quicker and more cheaply had staff been empowered or procedures written properly and efficiently. So many areas…………
@MilesT mmO2 or more precisely mmO2 plc, was never a “brand name” it was the name of the holding company that held of all of various O2 companies: O2 UK (BT Cellnet), O2 Ireland (Esat Digifone), O2 Germany (Viag Interkom) and Manx Telecom.
If I remember correctly, the reason the holding company was called mmO2 was because there was a shopping centre called O2 and couldn’t use the name O2 plc at the time. Eventually after a couple of years it renamed itself as O2 plc.
I suspect the long-term intent is to rebrand the group of operations as Telefonica, but that is a few financial transactions away.
The licence for the Virgin brand has already been paid for and extends into the 2030s. Scrapping the brand would incur additional costs.
The shopping centre mentioned is the o2 Shopping centre on Finchley Road near West Hampstead in London. Currently owned by LandSec.
That is due for demolition to be replaced by a major housing scheme within the decade (approvals were recently re-confirmed after a redesign to improve fire safety across several 12+ story towers and reduce amount of affordable/social tenure).
So even though it was a problem in the past it soon will never be a problem again.
@ yeehaa:
The name is ismm02 – as in 2002.
They might as well fire everyone in CS. It’s rubbish anyway, so it would be no great loss.
Former NTL went down at 12bn of debt so I’m not surprised. VMO2 are likely to go down in the next 18 months.
Actual tangible assets are next to nothing. NTL had the broadcast asset which they sold. They don’t even hold the freeholds to any of the physical building. Anybody remember WorldCom….
Don’t forget – with DOCSIS you can get a lot higher speeds than 1Gbps FTTP is a massive white elephant as the altnets are finding out.. The key factors are cost, reliability, customer service and the capacity to do what you need to do. If someone invents a network that can provide all that based on carrier pigeons I’m in..
FTTP is far superior to HFC in terms of both performance and maintainance costs. DOCSIS 4 is the white elephant. The problem the altnets have is massive debt and fantasy uptake targets.
Have you noticed that Openreach seem to managing fine with FTTP
Costs of DoCSIS 4 upgrade were close enough to FTTP that FTTP made sense. The rest of the gap will be made up in power and maintenance savings.
VMO2’s massive debt is a problem, but an interim one. Virgin Media is spending megabucks to overbuild its HFC network but has got no benefit yet from migration to XGS-PON. This will happen but it takes time to get users off an optical node and its downstream distribution cabinets to finally make the savings by spending nothing on maintenance and electricity. Also VM will finally be able to shut down the PSTN kit at its headends within five months, more savings to come. In future VM will be able to consolidate its headends once it moves to an all-IP platform, more savings (and they will be big).
I suspect this development is linked to the closure of the email services offering.
VMO2 is not involved in any acquisitions, and this has been the case for some time. Telefonica has already committed funding for the wireless upgrades, leaving rationalisation across the owners’ broadband businesses likely to be the main source of cost reductions.
All three of the major operators are now in a tighter position. The increased costs of operating in the UK will be undermining their profits and will likely have already had an impact on their investment planning.
I was with virgin media good product reliable fast service alternative was rubbish no fibre not even to the bt cabinet ok virgin was copper based but it worked speeds were incredible for our street. Then I came to end of contract tried to speak to someone at customer service eventually after many attempts over 2 days spoke to a real person they offered me a 50p a month saving Rang bt/ee has had seen there engineers working on the poles around our estate and to my surprise fttp was available to my address (virgin now had competition) was offered same speeds as current virgin package for £14 a month less than i was paying virgin and they would arrange all of the switching and up to £300 costs if virgin penalised me for leaving but as i was out of contract anyway didn’t apply, so no brainer i left virgin media. Surely this says up until virgin faces competition they have things their own way storys about their lack of, or poor foreign based cusomer services are all over the internet in my opinion virgins problems are of it’s own making.
“… the £2bn deal – supported by InfraVia Capital – to buy full fibre broadband altnet Netomnia, which squeezed free cash flow.”.
Also, fire people to “calm investors”.
That’s the “depth” at which strategic planning is based: Future plans “squeeze free cash flow”, and people are fired to “calm investors”.
No one involved in the decisions has stated that “people were fired to calm investors”. That is an invention of social media.
If you care to look, the offer was made before the outbreak of Trump’s war with Iran. Since then, operating costs have risen sharply, with all businesses now having to deal with that. On top of that, the debt markets are restoring old pricing markets because demand for quality debt outstrips supply.