Mike Fries may be totting up swingeing job cuts, a £22bn debt pile and the loss of hundreds of thousands of customers, but he appears to be putting a brave face on the situation. The UK telecoms company, which offers broadband, TV, landline and mobile services, had just announced £800m in cost savings, including potentially cutting up to a quarter of staff. Fries, the chief executive of Liberty Global, faced searching questions on its future and a potential refinancing of its huge debt pile next year.
However, for the company’s 16,000 UK staff, the job cuts, and a raft of other measures including abandoning investing in upgrading its cable network to full fibre, are symptomatic of a business if not in crisis, then under extreme pressure. And it has left industry watchers wondering: what has gone wrong at Virgin Media O2? Five years ago, Virgin Media-owner Liberty Global and Telefónica, owner of mobile network O2, completed a £31bn mega-merger that paved the way for a new “national champion” to challenge BT.
It represented the latest upheaval for a company defined by a deal to bring together cable firms NTL and Telewest with Sir Richard Branson’s Virgin Mobile for a 2007 rebrand. The post-merger mission, however, has proved tougher than bullish management, led by Fries’s lieutenant, Lutz Schüler, perhaps expected. In the last two years the company has lost 182,000 broadband and 644,000 mobile customers, although overall numbers still remain up since the merger, according to Enders Analysis.
VMO2 is operating in a market that has seen an explosion of competition including the emergence of about 100 so-called alt-nets laying fibre networks, and BT’s belated decision to “build like fury” to replace its ageing copper lines. This fight for customers has kept prices low and put profitability and revenues under pressure. Yes, it is a highly competitive industry but there has been a major executional problem.” In July, Virgin Media was fined a record £28m by telecoms regulator Ofcom after an investigation found millions of calls made by customers between January 2022 and September 2024 were probably mishandled.
The investigation showed that Virgin Media, which has repeatedly been among Ofcom’s most complained about companies in its quarterly reports, used deliberate tactics to repeatedly prevent customers from cancelling their contracts and moving to a new supplier. Last year, its O2 mobile arm prompted a backlash after implementing a surprise monthly bill increase, 40% higher than customers had been informed when they signed up to their contracts. Schüler later admitted that the move, which he estimated resulted in the loss of about 110,000 customers and a rebuke from the then-chancellor, Rachel Reeves, “wasn’t the best decision”.
A pledge to focus on improving customer service, and developments including a new voice AI agent to handle broadband fault calls, has paid off. In its results earlier this week, the company pointed to Ofcom’s latest data showing significant reductions in complaints across its business, and the lowest of any leading broadband provider. Some industry sources argue the management style since the creation of VMO2 has had echoes of hard-nosed private equity tactics – £5bn has been paid to shareholders in dividends since the merger, according to filings.
Extract — continue reading at the source.
