VMO2, a leading mobile and fixed broadband network operator, recently made public a significant loss of £3.3 billion in 2023, a situation exacerbated by a goodwill impairment of £3.1 billion due to increased costs of capital. Adverse macroeconomic conditions weighed heavily on its £8 billion debt, racking up hundreds of millions in extra interest.
In a statement, the company expanded on this, mentioning that they experienced 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.”
Not all was grim as VMO2 added 64,000 new broadband customers and 47,000 mobile customers over the past year. However, this did not significantly relieve the financial strain. The company recorded a decline in consumer fixed revenue of 2.3% to £3.3 billion, a financial trend they believe originates from consumers’ increasing cost-of-living expenses. Likewise, their B2B fixed revenue slumped by 2.4%, falling to £554 million.
Modest growth was seen in their mobile revenues, a 0.6% increase to £5.9 billion. This slow growth VMO2 attributes to a ‘low-margin handset revenue performance which weakened through the year.” As VMO2 CEO Lutz Schüler put it, “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 optimization.”
But despite these financial woes, VMO2 continues investing in its infrastructure. In 2023 alone, it funneled another £2 billion into its networks and services, marking 2023 as the quickest year of fibre rollout. As Schüler emphasised, “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.”
Looking ahead, VMO2 warns that the 2024 outlook will feel the sting of increased investment in growth projects, including marketing efforts for their rapidly growing fixed footprint and implementation of wider digital and IT efficiency programs. However, Schüler remains confident and states, “We remain focused on delivering against our core strategy and these key investments will help us to lay down strong foundations for future success.”
