Virgin Media O2 Puts Thousands of Jobs at Risk

Virgin Media O2 is preparing job cuts that could reach thousands of its 16,000 staff. Heavy debt and tougher rivals are behind the push, and a halt to fibre spending now looks close.

Fibre investment about to stop

The BBC has been told that VMO2 is highly likely to announce a stop to all fibre investment when it reports results on Tuesday. A deal to use a rival's fibre broadband network is described as very close.

The Financial Times reported on Friday that VMO2 was near such a deal, and BT's share price rose 7% that day. According to the paper, the company was minded to proceed after it had halted upgrades and expansion of its own infrastructure, a step taken to ease concerns over its debt pile.

A £2bn purchase under scrutiny

VMO2 had tried to answer the threat from smaller providers by buying the network builder Netomnia for £2bn. The money was to flow through nexfibre, a joint venture owned by VMO2's owners. The Competition and Markets Authority has provisionally found competition concerns in the purchase. Its final decision is due in December, and the finding angered VMO2.

Rivals on both sides, and a large debt

Cheaper "altnets" such as Hyperoptic, Community Fibre, Gigaclear and YouFibre are pressing the firm. So are giants like BT, which agreed to acquire TalkTalk. VMO2 firmly opposed that move and called it a "stitch-up" that would let BT strengthen its hold on the market.

BT's reply was that TalkTalk customers needed protection: without the takeover, their broadband provider faced collapse.

The latest accounts show total debt of £27.2bn at 30 June, against assets worth £45.9bn.

Most cuts in non-customer roles

The number of roles to go is not final. The BBC understands it is likely to be a sizeable chunk of the workforce. Most affected staff would be in jobs that do not deal with customers, and several senior leadership changes are already under way. Sky News reported the cuts first.

Contractors and suppliers are also expected to be reviewed alongside the cuts. VMO2 declined to comment.

The Prospect union, which represents VMO2 staff, called the cuts "disappointing and very unsettling". Deputy general secretary Noel McClean said the union would support members and work with employers to limit redundancies and arrange retraining and redeployment.

Our View

Fibre spending is being pulled back at the same time as jobs go. That suggests the savings are aimed at the debt, not at one department. Tuesday's results are expected to bring the halt to fibre investment. The CMA's December ruling will show whether the Netomnia route stays open.

Source: BBC News