The telecoms giant has more than £8 billion in loans which are pegged against central bank central bank interest rate benchmarks such as SONIA. That has resulted in hundreds of millions in increased debt interest costs after interest rates increased by more than 5 per cent over the past few years.
The company said in a statement, "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."
VMO2 said that consumer fixed revenue declined by 2.3% to £3.3 billion last year as "spend optimisation on mid-tier TV and home phone as household budgets were squeezed by the increased cost-of-living".
Total mobile revenue increased marginally by 0.6 per cent to £5.9 billion as the firm said growth had been impacted by "low-margin handset revenue performance which weakened through the year", while B2B fixed revenue decreased 2.4 percent to £554.0 million due to "pricing headwinds".
VMO2 added 64,000 new broadband customers and 47,000 mobile customers in 2023.
The company delivered 833,100 additional serviceable premises, with the majority of these premises forming part of the nexfibre FTTH network. Its gigabit serviceable footprint reached 17 million homes at the end of 2023, while the combined FTTH footprint was more than 4 million homes, with fibre rollout expected to further accelerate in 2024.
The target of 50 per cent 5G outdoor UK population coverage was also reached in Q4.
VMO2 warned that revenues could fall further in 2024 on top of a predicted single-digit decline in earnings. This is against a backdrop of amid high inflation, rising interest rates and fierce price competition impacting margins and increasing infrastructure investment costs.
Lutz Schüler, CEO of Virgin Media O2, said, "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.
"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."