Virgin Media to Cut 2,200 Jobs as Restructuring Bites

Virgin Media has announced plans to cut around 2,200 jobs in the United Kingdom by 2012, as it implements sweeping restructure plans. The cable operator said it would not start cutting jobs until the fourth quarter of 2009, with the majority of roles not being eliminated until the end of 2010. Virgin Media has not revealed in which departments or locations the job losses would occur, but said it would strive to avoid redundancies and offer staff alternative roles where possible. The company has 76 offices across the United Kingdom, with major sites in London, Edinburgh, Nottingham, and Sheffield.

Outlook and Implications

• The Restructure Hits Home: Virgin hopes the job losses, which comprise around 15% of Virgin Media's workforce, will help it achieve annual cost savings of more than £120 million (US$184.9 million) a year by 2012. The company said it hoped the "critical" restructure would allow the group to compete effectively and deliver for changing customer needs. The job losses come as part of a group-wide overhaul, following a review in April made in the wake of the firm's formation by the merger of Telewest and ntl in 2006, and the later acquisition of Virgin Mobile—a merger which in itself led to the loss of 4,000 jobs (see United Kingdom: 8 February 2007: NTL Rebrands as Virgin Media). Although Virgin sees the job losses as necessary, the company may face some tough times ahead as consumer confidence falters and the global financial crisis bites.

• A Fair Performance Crippled by the Yoke of Debt: Virgin Media recently reported that its third-quarter revenue had fallen 1.5% in 2008 compared to the same period in 2007 (see United Kingdom: 7 November 2008: Virgin Media Revenue Down; Loss Doubles on Currency Movements). However, Virgin Media has improved its performance in the face of fierce competition and the global economic downturn. The company's quad-play offering is showing strong performance against tough rivals such as BT and BSkyB, although Virgin Media's debt continues to overshadow its gains, with the company announcing it had secured an agreement to reschedule £4.3-billion-worth of debt until 2011 (see United Kingdom: 4 November 2008:Virgin Media Wins Approval for Debt Rescheduling).

• The Competition Hots Up: Virgin Media has been coming under pressure on a number of fronts, including broadband, where key rival BT has been consolidating its position at the top, launching its own digital TV service, BT Vision. Virgin has also been losing ground to BSkyB, with the News Corp. company on the verge of acquiring Tiscali, a move which could see the News Corp. company leapfrog Virgin to number two in the U.K. broadband market (see United Kingdom: 3 November 2008: BSkyB in Talks to Buy Tiscali). The roll-out of next generation broadband networks (NGNs) in the United Kingdom now leads the agenda, with a recent report concluding that the operators must fund this (see United Kingdom: 15 September 2008: New Report Recommends Telcos Fund Next-Generation Broadband in U.K.). Crippled by debt, Global Insight believes Virgin may struggle to keep up with this level of infrastructure investment, meaning it may be forced to rely increasingly on leasing from other operators, representing a loss of valuable revenue and network control.