Virgin Media O2 targets £0.8bn of annual savings and halts fibre upgrades

Virgin Media O2 said on Tuesday it has launched a transformation programme aimed at annualised cost savings of about £0.8bn by 2029, and will halt its fibre upgrade programme beyond existing commitments.

The company said about £0.4bn of the savings should arrive in 2027 and about £0.6bn in 2028, building towards the full run-rate in 2029.

Organisational redesign is expected to deliver about £0.3bn of the total, which is the only workforce-related element the company set out. It gave no headcount figure.

Restructuring costs of about £0.25bn are expected, and the company said the programme should pay back within one year.

The savings are gross figures across operating expenses, capital expenditure and certain other costs, measured against a 2026 baseline and excluding restructuring and programme delivery costs.

On the network, Virgin Media O2 said a low-cost upgrade will bring 2Gbps speeds to the majority of its HFC network in 2027, while the fibre upgrade is stopped beyond commitments already made.

Its full fibre footprint, including the nexfibre network, stood at 9.4 million premises at the end of September, up from 9 million premises reported in the second quarter.

The company also plans greater use of AI tools and digital channels, and said it has launched a voice AI agent to handle broadband fault calls.

Total service revenue fell 3.5% in the quarter to £2,036.7 million, adjusted for the Daisy transaction, which created the O2 Business venture.

That compares with a 3.9% fall in the second quarter, and the company said consumer fixed market pressures and planned streamlining of its B2B product portfolio drove the latest decline.

Adjusted EBITDA, a measure of operating profit before items such as depreciation, fell 2.6% to £995.2 million, against a 2.9% drop in the previous quarter.

Operating expenses fell 5.4% on the same adjusted basis, which partly offset the weaker revenue.

Consumer fixed average revenue per user fell 5.0% to £45.83, compared with £48.24 a year earlier, which the company put down to competitive intensity and the phasing of annual price rises.

Consumer fixed-line net losses were 23,300 in the quarter, an improvement of 9,400 on the same period last year.

Mobile contract net additions were 31,700, down from 64,200 a year earlier, driven by wholesale growth.

Adjusted free cash flow was an outflow of £197.3 million, compared with an inflow of £369.8 million in the third quarter of 2025.

Virgin Media O2 reaffirmed its 2026 guidance, including a 3% to 5% fall in both total service revenue and adjusted EBITDA, and property and equipment additions of £2.0bn to £2.2bn.

The company said it is reviewing planned cash distributions to shareholders for 2026. In February it had pointed to a payout of around £200 million for the year.

It will give an update in the first quarter of 2027, when it announces full-year results and knows the outcome of the Netomnia transaction.