24,700 customers lost in Q2 while while Ofcom probes alleged obstruction of mobile customers wishing to leave
Virgin Media O2’s has announced its earnings report and that it will lay off up to 2,000 employees by the end of the year – about a tenth of the workforce. Reportedly, the operator has started handing out redundancy notices already.
A Virgin Media O2 spokesperson said, “As we continue to integrate and transform as a company, we are currently consulting on proposals to simplify our operating model to better deliver for customers, which will see a reduction in some roles this year.”
The operator wants to rival BT as the UK’s biggest telco, with an ambitious, £4.5 billion plan to build-out fibre, but costs are rising across the telecoms industry with inflation and interest rates.
It seems that it need to “better deliver for customers” as the converged operator lost 24,700 customers in Q2; 15,300 were broadband customers and 1,500 prepaid mobile subscribers. The operator said it expected the losses as it allows customers to cancel contracts after a price rise without inflicting a penalty.
Earlier this month, regulator Ofcom opened an investigation into the company after complaints from mobile customers that the firm was making it difficult for customers to cancel services.
On the upside, 1.5 million customers take one of Virgin Media O2’s fixed-mobile service bundles. The operator reported revenues in Q2 rose 6.2% compared with a year earlier to £2.7 billion. while earnings before interest, tax, depreciation and amortisation went up 4.6% to £1 billion.
Paolo Pescatore of PP Foresight commented, “There’s no way of dressing this up. It is not good news for UK plc and we can expect to see further cost cutting measures across the industry. Ultimately it’s about efficiencies. All telcos are struggling to generate new forms of revenue. Margins continue to be squeezed due to rollout of next generation of networks and people are reluctant to spend more on connectivity.
Furthermore, the entity is still going through the integration process of two companies [Liberty Global’s cableco Virgin Media and Telefonica’s O2 UK merged in June 2021] coming together as one. Unfortunately, it feels like job cuts are becoming the norm, akin to annual price rises.”
He added, “For all providers it’s an opportune moment to focus on efficiencies [as] part of a successful long term strategy. There should be a greater focus on driving revenues as well.
“We’ve seen a correction in workforce across all sectors, most notably big tech. We are now starting to see this transcend into other verticals. Telco is not immune and with significant technological developments around the corner; this will further fuel job cuts.
“Should the Vodafone and Three deal get the green light, it is highly likely we will see a reduction in the combined workforce. It is an unfortunate consequence of a merger, joint venture.
Steve Kingdom, CTO at Xantaro, stated, “Virgin Media’s…results suggest that some customers are turning their backs on high-cost broadband options, with the biggest decrease in fixed-line customers in years, amidst ongoing economic challenges.
“This situation provides an opportunity for alternative network providers (altnets…By focusing on attracting dissatisfied customers from major ISPs, altnets can entice them with broadband packages that offer better cost-effectiveness.”
He pointed out, “Altnets can often offer more personalized and localised customer support, which is appealing to customers who feel they are getting lost among the massive customer bases of major ISPs.
“They must now ensure that their network infrastructure can deliver the promised high-performance connectivity. Investing in robust and reliable networks will be crucial to gaining the trust of customers who may be skeptical of smaller providers.”