VMO2 gets new HQ as integration efforts bear fruit

Virgin Media O2 plans to open a new headquarters in central London to replace two of its existing sites as part of its ongoing drive to further integration between its constituent businesses.

The news came alongside the presentation of the operator’s latest set of financial results, which essentially show that the tie-up between cable and Internet company Virgin Media and mobile player O2 is panning out pretty well.

Integration efforts will continue this year, the most high-profile element thereof being the opening of a new UK headquarters in Paddington Central. Slated to open at the back end of 2023, the new building will be Virgin Media O2’s first major new office space since the merger in June 2021 and will replace the company’s existing sites in Hammersmith and Slough.

The telco took great pains to highlight that there will be no headcount reduction as a result of the Slough office closure, scheduled for June. In addition to the proposed Paddington site, Virgin Media O2 will retain its office in Reading.

“While we’re proud of our long history in Slough, with two incredible offices in Reading and London this investment is an important step in our integration plans that will better support our flexible working culture, while bringing the buzz back to the office and creating exciting new opportunities for our people to collaborate,” said Patricia Cobian, Virgin Media O2’s Chief Financial Officer.

Those integration plans will also see the company start migrating its Virgin Mobile customers to O2 plans next month, with a view to completing the move by the end of the year.

It has already moved all the traffic from those customers onto the O2 network, which helped it to hit in excess of 30% of its £540 million run-rate synergies target last year, it revealed in its 2022 financial report.

“Additionally, total synergies will continue to increase in 2023 and we are targeting over 50 percent of run-rate at the end of the year which is supported by further mobile backhaul integration utilising the company’s own fixed network,” Virgin Media O2 said.

Speaking of which, the company added 519,000 new premises to its fixed network last year, meeting its targets; it accelerated the build in Q4 when it passed 188,000 premises. 24,000 of the new premises passed were subsequently transferred to nexfibre, the UK fibre JV announced by parent companies Telefonica and Liberty Global, and investor InfraVia Capital Partners in July, that came into being in December.

Virgin Media O2 added that it is on track to complete its full fibre network upgrade by 2028.

On the mobile side, it’s mainly about 5G. The firm said it has extended 5G connectivity to 1,600-plus towns and cities, and is set to deliver 5G services to half of the population this year.

The telco’s customer numbers are heading the right way too. It added 27,200 to its fixed base last year – the bulk of which came in the fourth quarter – including 57,000 broadband net adds. Contract mobile net additions came in at 142,000 for the full year, again with a strong showing in Q4, while its total mobile base grew by 2.4 million, driven by those contract adds, IoT and wholesale, despite weakness in prepaid. It ended the year with 44.7 million mobile customers.

Crucially, given its status as a recently-merged operator, Virgin Media O2’s bundled mobile and fixed broadband plan is gaining traction. Launched in late 2021, Volt now has 1.3 million takers, the telco said.

The mobile side of the business is still driving its top line though. Transaction-adjusted revenues were flat in 2022 at £10.38 billion, but while mobile revenues grew by 1.7%, fixed revenues were down by 3.4%. Meanwhile, earnings look solid. Transaction-adjusted EBITDA grew by 6.3% last year to £3.9 billion.

That means the telco hits its 2022 guidance of mid-single-digit growth in transaction-adjusted EBITDA and improved revenue trends versus 2021. This year it is shooting for more of the same.

“We have firm foundations in place, a clear strategy and a team that’s focused on building long-term commercial momentum and I’m confident we’ll deliver our 2023 guidance,” said Lutz Schüler, CEO of Virgin Media O2.

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