Virgin Media O2 targets 30% wage bill cut in £800m cost drive

Virgin Media O2 intends to cut its employee wage bill by 30% over the next two years. The telecommunications firm, which carries a £22 billion debt load, announced the move as part of a wider plan to save £800 million annually by 2029.

The company has not disclosed the exact number of positions that will be eliminated. However, the reduction could affect as many as 25% of its current 16,000 staff members. Most of the layoffs will impact non-customer facing roles, according to the announcement.

Lutz Schüler, the chief executive of the joint venture owned by Liberty Global and Telefónica, stated that the company is making difficult decisions to prioritize investments and reduce costs. He noted that standing still is not an option and that the actions required to ensure future success are starting now.

The £800 million savings target includes £300 million derived from workforce reductions. The remaining savings will come from reducing the use of contractors and reviewing supply chain contracts. The company expects to incur £250 million in restructuring costs as it implements these changes.

Virgin Media O2 will also alter its network strategy. It will halt investment in upgrading its network to full fibre beyond existing partner commitments. The full fibre rollout is currently 50% complete. Instead, the company will implement a lower cost upgrade to improve speeds on the rest of the network to 2Gbps by the end of next year.

Management plans to increase the use of artificial intelligence tools in customer service, network planning, and fault management. This technological shift is intended to support the reduced workforce and improve operational efficiency.

The company is also exploring wholesale deals to expand its service reach. It is reportedly close to an agreement with BT’s Openreach to extend its footprint from 19 million homes to potentially 25 million. This move would allow Virgin Media O2 to serve areas where its own physical network is not present.

Shareholders may face a lower dividend. The business said it is reviewing options for cash distributions to shareholders this year. This comes as the company reported losing 23,300 broadband customers and 7,800 consumer mobile customers in the quarter ending in September.

The announcement follows a period of regulatory and competitive pressure. Earlier this month, the company criticized a fast-tracked rescue of TalkTalk by BT. At the same time, the UK competition regulator signaled it might block a £2 billion takeover of Netomnia by Nexfibre, a firm in which Virgin Media O2's owners also hold stakes.

In a separate financial commitment, O2 secured naming rights to the London venue the O2 until at least 2038. The deal is valued at approximately £200 million and represents a record payment for the venue's naming rights.