Virgin Media O2 prepares ground for new strategic plan to simplify the business and drive sustainable growth

• Virgin Media O2 outlines direction of upcoming strategic plan and cost reduction measures that will create a simpler company with prioritised investment to improve customer experience, commercial performance and cash generation with a commitment to reducing leverage 

• Full plan, to be detailed at a strategic update around the time of the company’s full year results, will set a new direction for VMO2’s consumer brands and propositions, simplify its B2B portfolio and optimise network investments, including a halt of fibre upgrades. 

• Increased capital discipline will see investments targeted to areas with a clear customer benefit and near-term returns 

• Cost savings at an annual run rate of approximately £800 million by 2029, with around £400 million delivered in 2027, will result in a reduction in roles and fewer organisational layers, with senior leadership changes already underway, alongside a greater use of AI and digital tools to support faster decision-making and delivery 

CEO, Lutz Schüler, has today set out the direction for Virgin Media O2’s next chapter with an outline of the company’s upcoming strategic plan and a series of cost reduction measures that lay the ground for the future and will lead the company to greater customer satisfaction, sustainable growth and increased operational cash generation. 

The plan will set clear priorities for a simpler, faster and more focused company, optimising and redirecting investment towards initiatives that better meet customer needs and generate clear returns. 

This new chapter evolves the company’s existing strategy and builds on the strengths of Virgin Media O2’s brands and networks as well as the significant progress made in the first five years of the merger following more than £10bn of investment into the UK with continued commitment and backing from shareholders, Liberty Global and Telefónica. 

It comes against the backdrop of a tough macro-economic climate, an intensely competitive and shrinking broadband market and a paradoxical regulatory direction in fibre that does not reflect economic reality. This is balanced by the rapid evolution and adoption of AI tools that are transforming how businesses run and operate, presenting an opportunity to move more efficiently and at pace. 

Virgin Media O2’s new strategic plan will set the direction for future growth and commercial momentum across all areas of the business 

The strategic plan, which will cover Virgin Media O2’s consumer, B2B and wholesale businesses and its fixed and mobile networks, will focus on three priorities: putting customers first; concentrating resources and investment on fewer, larger opportunities; and creating a leaner, simpler organisation. Financially, this will translate to a focus on operating free cash flow generation, margin improvement and a reduction in leverage over the coming years.  

• In consumer, this will mean creating a more clearly defined role in the market for each of the company’s brands, each headed by a dedicated commercial leader driving better execution; simplifying the current product and proposition line up; addressing core customer pain points; and better rewarding loyalty to maintain value and reduce churn. 

• In B2B, O2 Business which has made significant integration progress in its first year will be focused on streamlining its product portfolio to cut complexity and better suit the needs of businesses; accelerating commercial execution and margin expansion; and delivering ~£70 million pre-tax annual run-rate synergies by 2030. 

• In wholesale the company will continue to sustain its position as the leading network of choice for MVNOs, and in fixed the company maintains strong credentials and capabilities to provide wholesale services through a single platform across the Virgin Media O2 and nexfibre footprints.  

• Virgin Media O2 will continue to invest in its mobile network with a clear focus on reliability and connection quality. This investment includes the continued expansion of 5G+, alongside O2 Satellite, utilising AI tools and Virgin Media O2’s network sharing arrangement with Vodafone to ensure efficiency, and the deployment of acquired spectrum, taking the company’s share to ~30%. 

• On the fixed network side, Virgin Media O2 will halt investment in further fibre upgrades beyond its existing commitments to partners. Market economics do not support three overlapping fibre networks, and the company’s HFC network will continue to deliver market-leading broadband at scale, with a low-cost upgrade being deployed to bring 2Gbps services to the majority of the network in 2027. Where any future fibre investment makes strategic sense, it will be supported off-balance sheet and only in non-altnet areas. The company is also exploring wholesale arrangements to support the expansion of its services to offnet areas not covered by Virgin Media O2 or nexfibre’s networks, providing an incremental revenue opportunity and flexibility for future. 

A simpler organisation focused on fewer initiatives but better execution 

Linked to this strategy and the delivery of the new plan, it is critical that the business is structured in a simpler more cost-effective way to remove duplication and layers that slow down decision making and dilute focus.  

To that end the company expects to deliver cost savings at an annual run-rate of approximately £800 million by 2029, with around £400 million delivered in 2027. Approximately £300 million of the 2029 run-rate saving is expected to come from a reduction in the size of the workforce, which equates to roughly 30% of the company’s total people costs over the next two years, with the majority of the reduction coming from non-customer facing roles.  

Organisational changes are already underway with a significant reduction of senior leadership roles since the summer. This includes Executive Committee changes and the bringing together of the previous commercial and operations areas of the business under Consumer CEO, Lyssa McGowan. Further reductions will occur across the wider business, with proposals subject to consultation. Conversations with those impacted will take place fairly and respectfully and Union representatives will continue to be briefed as these plans develop. 

Other significant cost measures will include reducing the use of contractors, simplifying supplier relationships and supply chain and reviewing technology licences. 

The company also expects a greater use of AI tools and digital channels to drive efficiency, productivity and better customer experience. This includes in customer service, building on the recently announced AI partnership with Sierra; network planning and fault management; and the personalisation of commercial offers. 

The result of these changes will be a leaner business that has fewer layers, greater focus, optimised investment and faster decision making to deliver a better experience for customers. 

Lutz Schüler, CEO of Virgin Media O2 said: “The direction we’re setting today paves the way for the next chapter of Virgin Media O2: a company that will be leaner, clearer on priorities and faster in delivery, with brilliant brands and an unwavering focus to get back to what really makes a difference to our customers. Given the market conditions we face, the regulatory backdrop in fibre and the technological changes sweeping across all areas of the economy, standing still and doing what we’ve always done is not an option and while many of these decisions are tough, they are necessary for our future success and growth. 

“While we will give a fuller update on the new strategic plan in the coming months, we are already progressing and making difficult decisions to prioritise investments and reduce costs which includes the size of our workforce. This is not something I take lightly but my commitment to our people is that for those leaving we will treat them fairly and with respect, and for those staying we will work differently, but as one team, to get back to winning again. Virgin Media O2 must evolve, and the action needed to make that happen starts now.” 

The company will provide further details on its strategic plan around the time of its full year results.