Virgin Media O2 prepares for mass job cuts amid debt and competition

The key facts

Virgin Media O2 plans to cut a significant portion of its 16,000-strong workforce; the exact number has not been determined
The company's debt as of 30 June stands at £27.2 billion, with assets of £45.9 billion
According to the FT, VMO2 is close to a deal with BT and may announce on Tuesday that it is halting investment in fibre

Job cuts and debt

Thousands of employees at the telecommunications company Virgin Media O2 (VMO2) are facing the threat of redundancy: the broadband operator is looking for ways to save money amid multi-billion-pound debt and intensifying competition. The exact number of positions to be cut has not yet been determined, but, as BBC News reports, it is likely to involve a significant portion of the 16,000-strong workforce. Most of the affected employees work in roles not directly related to customer service; a number of changes in senior management are already underway. The company is also expected to review its use of contractors and suppliers. VMO2 itself declined to comment.

The union and financial position

The Prospect union, which represents VMO2 employees, called the job cuts 'disappointing and deeply concerning'. Its deputy general secretary, Noel McClean, said the union 'stands ready to support our members during this difficult time', as well as to work with employers to reduce the number of redundancies and ensure retraining and redeployment for affected staff. According to the company's latest report, its total debt as of 30 June stood at £27.2 billion, with assets of £45.9 billion.

Competition and contentious deals

Pressure on the company is being intensified by competition from cheaper 'altnets' — smaller providers such as Hyperoptic, Community Fibre, Gigaclear and YouFibre. In response, VMO2 attempted to acquire the competitor Netomnia for £2 billion through the joint venture nexfibre, but the Competition and Markets Authority (CMA) has provisionally found competition concerns in the deal; a final decision is expected in December, which has caused displeasure at VMO2. A separate irritant was BT's agreement to buy another competitor, TalkTalk — VMO2 called it a 'collusion' that allows a rival to 'tighten its grip' on the market. BT, for its part, said the deal provides a 'safety net' for TalkTalk customers, whose provider would otherwise have faced collapse.

A possible U-turn on investment

Meanwhile, as the Financial Timesreported, BT shares jumped 7% on Friday on the news that VMO2 is close to an agreement to use a competitor's fibre network. According to the newspaper, VMO2 is ready to take this step after pausing the upgrade and expansion of its own infrastructure in order to ease the burden of its debt. The BBC, citing informed sources, adds that the deal is 'very close', and VMO2 is highly likely to announce on Tuesday, alongside the publication of its results, a complete halt to investment in fibre. If this happens, the company will effectively abandon its strategy of building out its own network in favour of renting infrastructure from a former rival — against the backdrop of the unfinished Netomnia deal and a CMA decision that has not yet been finalised.