UK telco blowup has slim path to avert Altice fate

Liberty Global

06/11/2026 10:05

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Jennifer Johnson
LONDON, Nov 6 (Reuters Breakingviews) - Europe’s debt investors must have déjà vu. One of the region’s most indebted telecoms groups is facing a selloff in its bonds as profitability deteriorates and restructuring fears mount. This time, it’s Virgin Media O2 – not Patrick Drahi’s Altice empire or the recently collapsed TalkTalk – at the centre of the storm. The UK group announced a cost-cutting drive earlier this week in a bid to reassure creditors, but its fate also depends on factors outside its control.
VMO2, which is jointly owned by Liberty Global LBTYA.O and Telefonica TEF.MC, has a fundamental mismatch on its hands. Its £22 billion debt load – now equivalent to about 5.6 times EBITDA – was built for a business with growing earnings. But high capex requirements and intense competition in the UK’s broadband market have nudged revenue and margins in the wrong direction. At its third-quarter results this week, the company affirmed that it expects sales and EBITDA to fall by 3%-5% in 2026 alone. Its most junior-ranking bonds now swap hands for less than 30% of face value, implying an Altice or even TalkTalk style haircut is coming.
Since the start of 2025, VMO2 has lost more than 200,000 broadband customers as a price war in the market gathered pace. So-called “altnets” – challenger operators known to entice consumers onto their fibre networks with cheap introductory offers – are a major part of the problem. According to Ofcom, nearly 47% of all premises covered by VMO2 and Nexfibre, its affiliated wholesale network, are also covered by at least one altnet. Competition from the altnets has also led incumbent operators to cut the prices of new customer offers, according to Enders Analysis.
One possible solution is consolidation, with operators such as CityFibre looking to buy up other players or more altnets going bust, which could result in a less cutthroat market. VMO2's owners and InfraVia have been planning a £2 billion acquisition of Netomnia through their wholesale fibre venture, Nexfibre. That would have allowed for some cost sharing, and given VMO2 a handy £1 billion in cash. But the deal was provisionally blocked by the Competition and Markets Authority (CMA) last month, prompting a further selloff in VMO2's bonds.
CEO Lutz Schüler is still hoping that deal can be revived. In the meantime, he is embracing self-help, promising £800 million in annual savings by 2029. These include a 30% reduction in people costs and a pause on further fibre upgrades beyond existing commitments. In theory, the savings should boost EBITDA, thus helping to improve VMO2's debt ratio. Yet the move is also a gamble, as fewer fibre connections may deter some customers.
Fortunately, VMO2 has time. Its closest debt maturities are in 2029, when about £3 billion of bonds and loans must be refinanced, meaning the group will need to start working on a refinancing in 2028. Rolling over the debt at current rates would add some £500 million to its interest costs, per CreditSights estimates, further straining already minimal free cash flow. But by 2028 interest rates may have come down, VMO2 may have cut costs, and competition may have eased. The upshot is that an Altice-style restructuring isn't inevitable, but a lot is out of VMO2's hands.
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CONTEXT NEWS
Virgin Media O2, which employs 15,000 people, said on November 3 it would ​save £800 million by 2029, partly by cutting 30% of its wage bill, mostly in non-customer-facing roles.
The telecoms group’s latest results highlighted the competitive pressures it faces, ​with a loss of 23,300 fixed-line customers in the third quarter, taking its total to 5.5 million.
Total revenue fell 5.7% to £2.4 ​billion and adjusted core earnings dropped 2.6% to £995 million.

(Editing by Neil Unmack; Production by Oliver Taslic)
((For previous columns by the author, Reuters customers can click on JOHNSON/Jennifer.Johnson@thomsonreuters.com))