Virgin Media O2 has outlined plans to reduce annual operating costs by approximately £800m by 2029, including substantial workforce reductions and a decision to halt further investment in upgrading parts of its existing cable network to full fibre.
The telecommunications company expects to deliver approximately £400m of the annual savings by 2027. Around £300m of the eventual annual reduction is expected to come from employee costs, equivalent to approximately 30% of its current total people costs over the next two years.
The company has not confirmed the number of positions that will disappear. Most reductions are expected to affect non-customer-facing roles, with further organisational changes subject to consultation. Senior leadership reductions have already begun, alongside changes to the way commercial and operational functions are managed.
Chief executive Lutz Schüler is directing the business towards a smaller range of commercial priorities, closer control of capital expenditure and improved cash generation. The restructuring follows substantial investment since Virgin Media and O2 combined in 2021, but comes against a more difficult market for fixed-line broadband providers.
The group is contending with intense competition from rival fibre operators, pressure on customer numbers and the cost of maintaining and expanding national communications networks. Its third-quarter results showed a net reduction of 23,300 consumer fixed-line customers, leaving the company with approximately 5.5 million connections in that category.
Adjusted quarterly earnings before interest, taxation, depreciation and amortisation were approximately £995.2m, down 2.6% on the company’s adjusted comparison. Total service revenue was approximately £2.04bn, representing a 3.5% comparable decline after accounting for the Daisy transaction.
Capital expenditure is another significant part of the revised strategy. Virgin Media O2 intends to stop further fibre upgrades beyond commitments already made to partners, while continuing to operate its existing hybrid fibre-coaxial network. The company plans to introduce lower-cost technical upgrades that could deliver broadband speeds of 2Gbps across most of that network during 2027.
Future fibre investment will be considered more selectively, with the company favouring arrangements that do not require further expenditure to sit directly on its balance sheet. It is also exploring wholesale agreements to supply services outside its existing network coverage, potentially extending its reach without constructing all of the infrastructure itself.
The changes affect the group’s business services operation as well. O2 Business is expected to simplify its product portfolio and improve commercial execution, with a target of approximately £70m in annual pre-tax synergies by 2030. Reducing overlapping services and internal processes forms part of the proposed operating model.
Virgin Media O2 also plans to make greater use of artificial intelligence and digital systems, including in customer service, network planning, fault management and the personalisation of commercial offers. These applications are intended to reduce routine operating costs while helping the company respond more quickly to customer requirements.
Beyond direct employee costs, the savings programme includes less reliance on contractors, changes to supplier relationships, simplified procurement arrangements and reviews of software licensing expenditure. The breadth of the programme means its commercial effects will extend into the company’s supply chain as well as its own workforce.
Further details of the strategy are expected around the company’s full-year results. Until then, the precise job reduction total, final organisational structure and distribution of spending cuts across the network remain to be confirmed. The announced savings targets establish the financial scale of the restructuring, while consultation and implementation will determine the effect on individual roles and operations.
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