Virgin Media O2, Telefónica's subsidiary in the United Kingdom, against the ropes due to debts of more than €25 billion

LondonMassive cuts at Virgin Media O2 (VMO2) in light of the dire results of the telephone company, which operates in the British market and is 50% owned by the Spanish firm Telefónica. A debt of 25.6 billion euros and a continuous loss of customers over the last year and a half threaten its business model in the United Kingdom. The presentation of third-quarter results this Tuesday confirmed the crisis, and reports that appeared in the London press last week indicated that the company is preparing a workforce reduction of 4,000 jobs, 25% of its workforce.

The 2026 results, therefore, have finally forced Virgin Media O2 to reorient its strategy to reduce costs and contain investments. Thus, in the third quarter of this year, the company lost 23,300 fixed-line and broadband customers and ended the period with about 5.5 million customers in this segment. These new figures are in addition to the loss of more than 170,000 customers recorded during the 18 months prior to the end of June. The trend points to a persistent difficulty in retaining subscribers in an increasingly competitive market, especially in broadband services.

However, VMO2's decline is not limited to broadband. The group also lost 49,800 mobile phone connections during the third quarter, bringing the total to 46.3 million. In the first quarter, they lost more than 310,000 compared to the last quarter of 2025, and in the second quarter of this year, about 17,800. Service revenue was 2.0367 billion pounds, 3.5% less than in the same period of the previous year. Adjusted operating profit before interest, taxes, depreciation and amortization (EBITDA) fell by 2.6%, to 995.2 million.

Virgin Media O2 is equally owned by Telefónica O2 and Liberty Global. The latter is a North American multinational group domiciled in Bermuda and controlled by billionaire John Malone, known asthe cable cowboy. Liberty Global has its headquarters in London and also operates in the Benelux through the Ziggo Group.

At the time of the creation of the business alliance between Telefónica and Liberty Global (in 2021), Virgin Media O2's ambition was to compete with British Telecom. When announcing the deal, José María Álvarez-Pallete highlighted: "Combining O2's mobile business with Virgin Media's high-speed broadband network and entertainment services will mark a turning point in the United Kingdom, at a time when the demand for connectivity is greater and more critical than ever".

The data, however, does not confirm this. Virgin's management response is a profound restructuring: the company has announced a cost-reduction program expected to generate annual savings of 800 million British pounds (about 960 million euros) by 2029, with some 400 million already planned for 2027. Of this amount, approximately 300 million will come from reducing personnel expenses – the aforementioned 4,000 job cuts, although not yet officially confirmed –, which will be equivalent to nearly 30% of labor costs over the next two years.

The company is basing its strategy on reducing staff in areas without direct contact with users, a simplification of the management structure, and a decrease in the contracting of external services. The use of artificial intelligence in customer service, network planning, and fault management will be intensified.

The original sin

At the time of the agreement between Telefónica O2 and Liberty Global, Virgin Media's net debt was 13.2 billion euros. For its part, Telefónica O2 had virtually none. To balance the stakes of the two owners, the joint venture turned to new loans and began operating with a debt of about 21.5 billion pounds. The subsequent rise in interest rates has made financing more expensive and has made it difficult to reduce a liability that is now weighing down the business.

Added to the aforementioned debt of 25.6 billion euros is the fall in the company's bond prices throughout the summer. All of this—competitive pressure, the loss of subscribers, and the need to continue investing in infrastructure—has ended up forcing a change of model.

CEO Lutz Schüler has argued that the decisions are difficult but necessary, given the new market conditions. The company is set to present a complete strategic plan coinciding with the publication of the next annual results. However, the restructuring represents a significant shift for an operator that, five years after the merger, must prioritize debt reduction and profitability over the expansion of its network.

While it is not yet official, one of the most significant aspects of the new plan, which has been outlined by various media outlets in the United Kingdom, is the halt to investments in new fiber optic network upgrades beyond the commitments it has already made to its partners. The alternative is a more economical solution: upgrading its current hybrid fiber-coaxial (HFC) cable network, which will allow for speeds of up to 2 gigabits per second to be offered to the majority of customers by 2027. Future investments in fiber would be limited to areas where they make commercial sense and financing formulas outside the company's balance sheet will be sought.