Virgin Media announced a programme of 2,200 job cuts, or 15 per cent of its total staff, as part of a restructuring operation. The company claimed it would improve efficiency "significantly", and that cuts would be implemented mainly between the end of 2009 and the end of 2010.
The move by Virgin, which employs 14,600 staff, is seen as necessary if it is to continue to service its recently rescheduled debt burden. It intends the move to improve cash flow by £120m (E152m) by 2012. Neil Berkett, chief executive, said: "These changes are critical to ensuring Virgin Media is positioned to compete effectively and deliver on our customers' changing expectations."
However it's hard to see how cuts won't adversely affect customer service, where cable operators have been consistently poor in the past and if there is a negative effect on churn that will hit cash flow.
The company said that it would discuss details of the job losses with its staff. They could include streamlining call centres that have until now operated separately for the different customers of the cable companies that merged to form Virgin Media, NTL and Telewest.
Last week, Virgin Media announced third-quarter results that were in line with expectations. A few days earlier, it said it had been successful in its efforts to persuade creditors to put back the due dates on amortisation payments of £4bn (E5bn) from 2010 to 2012.
One analyst told the FT: "The fact is that they still have to find £4bn by then and, at current rates, they will be able to add £1.8bn of cash flow to their cash pile of £500m, leaving them £1.7m short. These savings will go towards that. I don't think there is anything they can do to close the gap completely but they have to do something."