Up to 4,000 of Virgin Media O2’s 16,000 employees could lose their jobs. That is a quarter of the payroll, and Sky News says the plan is meant to deal with a debt pile of £22 billion.
Sky News reported the story on Saturday, citing people close to the company. Virgin Media O2, jointly owned by Liberty Global and Spain’s Telefónica, did not immediately respond to a request for comment. Reuters, which relayed the Sky report, said the company declined to comment on it.
Where the cuts would land
Most of the roles at risk are not customer-facing, according to the report. The catch is the number itself: it is not final, and the precise total of job cuts has yet to be settled. Senior leadership changes are already under way. The company is also expected to look hard at how much it spends on contractors and suppliers.
The owners want savings
The pressure comes from the top. The Financial Times reported in July that the owners were weighing options to reduce the debt. In September it reported that shareholders were seeking to cut costs by about £600 million.
Follow the money, and the logic is plain. For a heavily indebted company, trimming headcount and supplier bills is mainly a way to raise operating cash flow, the pool of money that pays interest and repays what is owed. It has little to do with what customers buy.
If those savings turn into steadier cash, lenders and bond investors tend to see lower refinancing risk, meaning a better chance of rolling over maturing loans or issuing new bonds on easier terms. If the savings arrive slowly, or the cuts hurt how the business runs, credit markets can tighten fast through higher borrowing costs and stricter loan terms. So the first test of this plan is likely to show up in the company’s financing conditions, not in day-to-day service.
Against £22 billion of debt, the £600 million shareholders want is the figure to watch.
Sources
- Virgin Media O2 to cut thousands of jobs, Sky News reports
- Virgin Media O2 to Cut Thousands of Jobs Amid Cost Reduction Drive
- Virgin Media O2 to slash thousands of jobs in cost-cutting plan – AOL
- Virgin Media O2 Plans Thousands Of Job Cuts
- British telecoms firm Virgin Media O2 to cut thousands of jobs, Sky News reports
Photo: Jaggery (CC BY-SA 2.0)
