VMO2 axes 30% of workforce costs and halts fibre build in £800M plan

Virgin Media O2 plans to cut £800 million (US$1.1 billion) a year from its cost base by 2029, with £400 million ($536 million) landing next year, the UK operator announced alongside third-quarter results. The plan's sharpest edges: around £300 million ($402 million) will come from job cuts equal to roughly 30% of total workforce costs, and the fibre build stops here.

The company will publish the full plan with its full-year earnings in the coming months, but the direction is already clear. VMO2 blames a tough macroeconomic climate, what it calls an "intensely competitive and shrinking broadband market," and a "paradoxical regulatory direction in fibre that does not reflect economic reality."

That regulatory jibe has a specific target. The UK's Competition and Markets Authority (CMA) has raised concerns in its probe of Nexfibre's proposed acquisition of Netomnia. Nexfibre is co-owned by VMO2's own parents, Liberty Global and Telefónica. When your shareholders' altnet deal attracts scrutiny, apparently, the rules stop reflecting economic reality.

How deep do the job cuts go?

The leadership cull began this summer with what VMO2 describes as a "significant reduction of senior leadership roles." The rest awaits consultation, and the company says most affected roles won't be customer facing. It won't confirm a headcount. Sky News reported last week that the figure could reach 4,000, about a quarter of the workforce.

VMO2 says the savings will lift operating free cash flow, improve margins and reduce debt leverage. Mobile investment, including 5G+ and satellite, stays untouched. The company also plans clearer roles for its brands — Virgin Media, O2 and giffgaff — which suggests those roles were, until now, unclear.

Why stop the fibre build?

On network investment, VMO2 won't upgrade beyond existing commitments to partners. Its argument, in its own words: "market economics do not support three overlapping fibre networks, and the company's HFC network will continue to deliver market-leading broadband at scale."

Any further fibre investment will sit off-balance sheet and strictly in non-altnet areas. The company is exploring wholesale partnerships which, according to a Financial Times report citing anonymous sources, may include Openreach. That's less than two months after CEO Lutz Schüler said VMO2 wanted to challenge Openreach. The challenger has, it seems, applied to become a customer.

Analyst Paolo Pescatore of PP Foresight called the fibre halt a "significant reversal" on LinkedIn. "Pulling back on fibre risks weakening differentiation over time," he wrote. He didn't stop there. The move "feels like a last roll of the dice to rebuild confidence. Simplification is overdue, but the scale of the changes raises uncomfortable questions about what the merger has delivered." His prescription: brand clarity "must translate into compelling offers, stronger loyalty and fewer reasons to leave."

What did Q3 actually say?

The financial backdrop explains the urgency. Q3 revenue fell 5.6% to £2.4 billion ($3.2 billion), and adjusted EBITDA dropped 2.6% to £995 million ($1.3 billion). The figures are adjusted for the transaction that merged VMO2's complementary B2B activities with Daisy Group. The company pinned the decline on consumer fixed-market pressure and planned B2B portfolio streamlining, only partly offset by a 5.4% cut in operating expenses.

So costs fell, revenue fell faster. Cutting another £800 million won't fix that arithmetic on its own, as Pescatore noted — costs alone don't restore growth.

VMO2 will lay out the complete plan around its full-year results early next year. Until then, the fibre pause, the consultations and the possible Openreach wholesale deal are the pieces worth watching.