Virgin Media O2’s plans to axe up to 4,000 jobs could save the telecoms giant around £200m a year, but may do little to ease its mounting debt burden.

The broadband provider is preparing to cut as much as a quarter of its 16,000-strong workforce as it battles fierce competition, falling revenues and concerns over its £22bn debt pile.

Erhan Gurses, telecom industry analyst at Bloomberg Intelligence, estimated that the proposed redundancies could generate £200m in annual gross personnel savings by 2028, with further reductions in contractor spending potentially increasing that figure.

“The scale and timing show the cost-saving push has accelerated notably”, he said.

However, Gurses warned that even substantial job cuts, combined with plans to scale back investment in fibre infrastructure, would leave the company’s debt levels stubbornly high.

“Yet it wouldn’t effectively resolve the balance-sheet strain,” he said, estimating that net leverage could remain close to 5.5 times earnings in 2028, well above Virgin Media O2’s target range of four to five times.

Thousands of jobs at risk

The restructuring, first reported by Sky News, could affect as many as 4,000 employees, although the final number has yet to be determined.

Most redundancies are expected to fall in non-customer-facing roles, while changes to senior management are already under way.

The company, jointly owned by Liberty Global and Telefónica, is also reviewing its use of contractors and suppliers as part of a broader cost-cutting drive.

Virgin Media O2 declined to comment on the reported plans.

The telecoms giant is expected to outline its financial savings targets alongside third-quarter results on Tuesday.

The cuts come as the company struggles with slowing growth and rising pressure from investors over its debt.

Revenue fell 7.9 per cent in the previous quarter, while net debt stood at 5.89 times annualised adjusted earnings.

Prospect, the union representing some Virgin Media O2 employees, described the planned redundancies as “disappointing and very unsettling”.

Noel McClean, its deputy general secretary, said the union would work to minimise job losses and secure retraining and redeployment opportunities for affected staff.

Fibre retreat amid competition squeeze

The proposed cuts come as Virgin Media O2 faces growing pressure from cheaper alternative broadband providers, including Community Fibre and Gigaclear.

The company is also understood to be close to striking a deal to use BT’s Openreach fibre network, potentially allowing it to extend its coverage without funding further infrastructure construction.

The potential agreement comes despite an increasingly bitter dispute between the two telecoms giants.

Virgin Media O2 last month branded BT’s agreed takeover of struggling rival Talktalk a “stitch-up”, accusing the company of tightening its grip on Britain’s broadband market.

Meanwhile, the Competition and Markets Authority has provisionally raised concerns over a proposed £2bn acquisition of Netomnia by nexfibre, a fibre joint venture backed by Virgin Media O2’s shareholders.

The regulator is due to make a final decision in December.