Redundancy risks for staff
VMO2 faces redundancy risks for thousands of staff as it attempts to manage billions in debt. The firm holds £27.2bn in debt against £45.9bn in assets as of 30 June. These cuts will impact a sizeable chunk of the 16,000 total workforce. Most affected employees work in non-customer facing roles, and senior leadership changes are already underway according to Sky News. The Prospect union, which represents VMO2 staff, described the cuts as "disappointing and very unsettling."
I find these cuts to be a direct result of the firm’s struggle against cheaper altnet competitors like Hyperoptic, Community Fibre, Gigaclear, and YouFibre. Deputy general secretary Noel McClean says the union is "committed to supporting our members through what is a difficult time, as well as also working with employers to explore ways to mitigate the number of redundancies and ensure retraining and redeployment of staff affected." VMO2 will also review its use of contractors and suppliers to save money. This restructuring follows the company’s failed attempt to buy Netomonia for £2bn through nexfibre, a joint venture owned by the owners of VMO2. VMO2 faces intense competition from both smaller providers and giants like BT.
Competition and infrastructure shifts
Following the Competition Markets Authority’s block on the Netomonia deal, the regulator approved BT’s takeover of TalkTalk in October. VMO2 called the deal a "stitch-up." This allowed its rival to "tighten its grip" over the market, according to VMO2. BT said its deal provided "a safety net" for TalkTalk customers as their broadband provider faced collapse without the takeover. I view the decision to halt infrastructure upgrades to ease debt concerns as a blatant admission of the company’s diminished competitive power.
After the Financial Times reported that VMO2 might use the rival’s fibre broadband network, BT shares jumped 7%. The BBC reports that VMO2 will likely announce it will stop all investment in fibre in its results on Tuesday. VMO2 halted its expansion. The company remains under pressure from both smaller providers and giants like BT, which has regulatory permission to acquire TalkTalk. I see the decision to pause its own infrastructure expansion as a desperate attempt to manage a massive debt pile of £27.2bn. VMO2 was minded to go ahead with the plans to use the rival’s network.
