British media and telecom major Virgin Media O2 is set to cut thousands of jobs and scale back its fibre ambitions as it seeks to increase its profitability in the United Kingdom’s fiercely competitive broadband and mobile markets.
The telecoms operator, jointly owned by British-Dutch-American multinational venture Liberty Global and Spain’s Telefonica, is being squeezed by the roll-out of rival BT’s national fibre network and a significant number of small “alt-nets” offering cheaper, faster connections.
Virgin Media O2, which employs 15,000 people, said on Tuesday that it would save 800 million pounds by 2029 by cutting 30% of its wage bill, with the majority of the reduction coming from non-customer-facing roles.
The company also said it was in talks about using a rival’s network to expand beyond its footprint, which would mean the venture leveraging BT’s national Openreach network, with the latter already being used by Sky and Vodafone, along with BT’s own consumer and business services.
CEO Lutz Schuler, while calling the changes tough but necessary, remarked, “Given the market conditions we face, the regulatory backdrop in fibre and the technological changes sweeping across all areas of the economy, standing still and doing what we’ve always done is not an option.”
Virgin Media O2, in Q3, reported a loss of 23,300 fixed-line customers in the third quarter, taking its total to 5.5 million.
Total revenue fell 5.7% to 2.4 billion pounds (USD 3.22 billion), while adjusted core earnings dropped 2.6% to 995 million pounds.
Virgin Media O2 had previously planned to upgrade its cable network to fibre and expand its footprint through the acquisition of Netomnia, one of the largest altnets, but Britain’s competition regulator opposed the deal in October.
Nexfibre, a joint venture between Virgin Media O2’s owners and investment firm InfraVia, will likely challenge the regulator’s reasoning.
Virgin Media O2 said that market economics did not support “three overlapping fibre networks” and it would instead upgrade its existing cable network, which uses older technology, to offer 2Gbps services to the majority of customers next year.
“Where any future fibre investment makes strategic sense, it will be supported off-balance sheet and only in non-altnet areas,” it said.