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Virgin Media O2’s owners are weighing options to reduce the company’s £22bn debt pile after investor fears about the UK telecoms group’s finances accelerated a sell-off in its bonds.
Options for shareholders Telefónica and Liberty Global include cutting VMO2’s expected £200mn dividend this year, shedding jobs and reducing capital expenditure, according to two people familiar with the matter.
The price of VMO2’s roughly £1.1bn of senior unsecured debt has plummeted, with one $925mn bond falling as low as 57 cents on the dollar on Wednesday, having traded at about 78 cents at the start of July.
VMO2’s safer senior secured bonds have also fallen sharply, with the price of a $1.4bn note reaching 76 cents on the dollar, down from 92 cents at the beginning of the year.
The company has become a focal point for investors in Europe’s junk debt market, with one distressed credit investor describing VMO2 as “the talk of the town right now”.
Telefónica and Liberty Global have both publicly stated over the past week the need to cut VMO2’s debt as part of efforts to calm credit investors.
Bondholders have been spooked by the threat posed by the dozens of small fibre network operators, known as “altnets”, which raised more than £31bn to lure customers from VMO2 and BT-owned Openreach with cheap fibre broadband.
Virgin shed 33,500 broadband customers in the first half of 2026, on top of the 138,400 it lost last year. It had a customer base of 5.42mn at the end of June.
Liberty Global chief executive Mike Fries on Friday urged investors to remember that VMO2’s shareholders had “many tools” at their disposal “if necessary” to cut the company’s debt, boost operating performance and improve free cash flow — “both organic and inorganic”.
Telefónica chief financial officer Juan Azcue told analysts on Wednesday that it and Liberty Global were “committed to being proactive” in managing VMO2’s balance sheet and had “levers to pull to materially increase free cash flow and accelerate deleveraging”.
Investors are also concerned about the shareholders’ role in the £2bn acquisition of Netomnia, the UK’s fourth-largest broadband network.
Liberty Global and Telefónica are partnering with private equity firm InfraVia Capital to buy Netomnia through their joint venture Nexfibre.
Although Nexfibre is a separate company from VMO2, investors are worried the deal will squeeze its cash flow.
VMO2 will take a 15 per cent equity stake in Nexfibre as part of the transaction, receiving £1.1bn in cash in exchange for switching traffic from 4.6mn homes on to the company’s network.
However, it will have to pay fees to access Nexfibre’s infrastructure in future, sparking fears about its longer-term finances.
Liberty Global, Telefónica and VMO2 declined to comment.
