VMO2 records £3.3bn loss as interest rates begin to bite


Inflation is driving up the cost of Virgin Media O2 (VMO2)’s loans, pushing it up to 5.2% from 4.7% a year ago

This week, VMO2 has announced a £3.3 billion loss in 2023, having incurred a goodwill impairment of £3.1 billion related to the increased cost of capital.

The mobile and fixed broadband network operator explained that the difficult macroeconomic environment has seen their £8 billion in debt become an even heavier burden over the last year, costing them hundreds of millions of pounds in additional interest.

“We recorded a non-cash goodwill impairment of £3.1 billion primarily related to an increase in the weighted average cost of capital and the impacts of the broader macroeconomic conditions in the UK on estimated future cash flows,” explained the company in a statement.

The rest of VMO2’s results were somewhat flat. While VMO2 noted that it had added 64,000 new broadband customers last year, as well as 47,000 new mobile customers, this has done little to help the company’s bottom line.

VMO2 recorded a consumer fixed revenue decline of 2.3% to £3.3 billion, which the company attributed to a tightening of purse strings by consumers due to the increased cost-of-living. Their B2B fixed revenue was down a similar amount (2.4%), dropping to £554 million.

Mobile revenues increased by 0.6% to £5.9 billion, with VMO2 attributing the slow growth to “low-margin handset revenue performance which weakened through the year”.

“We ended the year with stable revenues in line with our revised guidance at Q3, and achieved the low end of our mid-single-digit Transaction Adjusted EBITDA growth guidance through accelerated synergy execution which offset the impacts of consumer spend optimisation,” explained VMO2 CEO Lutz Schüler.

“Operationally, we invested another £2 billion in our networks and services, with 2023 being the fastest year of fibre rollout as our fibre footprint reached over 4 million premises. In aggregate, our fully gigabit serviceable footprint now reaches over half of all UK homes, and our 5G network covers half the UK population. We also continued trading momentum with mobile and fixed customer growth, supported by sustained customer-first initiatives like inclusive EU roaming and our O2 Priority loyalty scheme.”

“Looking ahead, the 2024 outlook will be impacted by incremental investment in key initiatives to drive future growth, including increased marketing across our rapidly expanding fixed footprint, new commercial initiatives and wider digital and IT efficiency programmes. We remain focused on delivering against our core strategy and these key investments will help us to lay down strong foundations for future success.”

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