The Tech Briefing
The Tech Briefing
Episode 6: Tech Job Losses. Virgin & O2 merger confirmed.
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Episode 6: Tech Job Losses. Virgin & O2 merger confirmed.

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In this episode we discuss the scale of job losses in the tech industry and give some depth to the O2 and Virgin merger.


Tech Job Losses

While the tech industry has suffered far less than some others and has in many areas fared very well, as we saw in last weeks episode where we looked at the financial results of the top tech businesses. It hasn’t been completely untouched though as some of its largest companies suffer from huge drops in demand.

Those hardest hit in the tech industry are also tending to be those that cross over in to the hospitality and travel industries which themselves have seen demand reduce to almost zero across the globe.

Uber has announced that it is cutting 3,700 staff, around 15% of its global workforce, not including drivers which are of course technically self-employed. The majority of these job cuts are in their recruitment and customer service teams. Uber has seen demand for rides drop 80% in April. While some regions have seen demand increase again as they come out of lockdown demand is yet to reach pre-COVID levels. With restrictions set to be in place for months to come it doesn’t look like Uber will see demand significantly improve any time soon.

Another of Uber’s businesses, JUMP, which operates dockless bicycles in many major cities such as London is cutting all of it’s 500 staff. This is also related however to their recent acquisition of Lime scooters which itself was about the go bust as people no longer used their small electric scooters to get around city centres.

It’s a similar story with Uber’s rival Lyft where they are laying off 17% of their workforce, equating to almost 1000 people.

One of the most impacted tech companies, Airbnb, is laying off 1900 people, 25% of it’s workforce. As the global travel industry has been reduced to almost nothing it’s no surprise that Airbnb has seen revenues plummet. Interestingly, we’re not seeing cities flooded with regular residential rentals as properties that were previously on Airbnb now have no demand. Landlords are shifting to longer term residential rentals and away from short term holiday lets.

Recruitment is another area that has seen significant falls in demand. Here, one of the major tech players, Glassdoor, has announced that 300 of it’s roughly 1000 employees will be laid off.

As with every other industry there is hope that demand will pickup quickly again in the near future but I remain sceptical. Consumers and businesses are going to be very wary of spending cash and with so many becoming unemployed any cash they do have is going to be reserved for absolute essentials. Travel and hospitality businesses, whether in the tech industry or not, are going to have a difficult year ahead and no doubt we will see more job losses in the industry as a result.


Virgin & O2 agree on a merger

In an industry defining deal Liberty Global and Telefonica will merge their UK telecoms businesses - Virgin and O2 respectively. The deal will create the largest operator in the UK with 46 million subscribers across TV, broadband, home phone and mobile.

The deal values the two companies at just over £31 billion with each company now taking 50:50 ownership of the new venture. Virgin will pay O2 £2.5 billion to enable this split which will be very warmly welcomed by the debt laden Telefonica.

No doubt that this will be the largest merger for some time as COVID-19 looks to disrupt the world for many months to come. While the talks on the deal are believed to have started back in November last year they were seriously slowed by the arrival of the pandemic which forced negotiations online in video calls rumoured to go on in to the early hours of most mornings. With WebEx being the preferred video conferencing tool there were the usual at-home interruptions of pets, children and dinner as top execs negotiated in shorts and t-shirts (why not).

In the early hours of 7th May the deal was finalised. It will not be completed until the summer of 2021 though as it enters regulatory scrutiny.

As discussed in last weeks briefing the combination of the two companies brings huge competition to the UK quad-play market (TV, Broadband, home phone, and mobile) which has been largely dominated by Sky and BT over the years, with BT coming to the forefront as it launched it’s TV service and BT Sport some years ago. This new venture will be slightly larger than BT.

Virgins substantive fibre broadband network and TV service combined with O2’s national mobile network will see it offer a hugely competitive service to the UK market, leaving the likes of Vodafone and Three at the bottom of the pile. The deal also now frees Virgin from its virtual operator contract with Vodafone which was due to start next year. This is another blow for Vodafone who will likely kick-up a fuss with competition regulators. Three have tended to keep quiet on these sorts of matters.

I think this is a great deal for both companies and the UK consumer who will now have another great option for combining all of their telecoms and TV in to a single package. While UK regulators have previously been negative towards mergers in the mobile network space I don’t believe they’ll have the same view with this as the two companies have largely complementary offerings.


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