Nearly 90% of the UK workforce at telecom company Lycamobile has been notified that they may face job cuts, the Guardian has learned. This announcement affects more than 300 employees, leaving them uncertain about their future just before Christmas.
Lycamobile, owned by British-Sri Lankan businessman Allirajah Subaskaran, a multimillionaire Tory donor, is known for selling pay-as-you-go SIM cards that are particularly popular among low-paid workers who rely on cheap international calls. The company operates both in the UK and overseas.
On Friday, staff members at Lycamobile’s headquarters in the City of London were informed that the company was facing “serious challenges” and plans to reduce its workforce by up to 316 jobs, leaving only about 48 positions in the UK.
In 2022, the company reported a £24m loss, the latest year for which financial records are available. Auditors have expressed concerns over the transparency of Lycamobile’s financials. The company is also embroiled in an ongoing dispute with HMRC over an alleged £51m unpaid VAT bill related to phone “bundles” sold to customers.
Last year, Lycamobile’s French arm was fined €10m (£8.3m) by a Paris court for money laundering and VAT fraud.
In a meeting with employees on Friday, Lycamobile’s general counsel, David Dobbie, cited factors such as intense competition, rising costs, “legacy technology issues,” and inefficiencies from overlaps between divisions in the UK and India. He did not address the company’s tax disputes.
Dobbie explained that some of the services to be cut in the UK, including customer service, would be moved offshore, particularly to India. He stated that staff would be informed of their outcomes after a consultation process begins soon, with no layoffs to occur before January 31.
“This proposed expansion of global service centres is expected to deliver significant cost savings,” Dobbie said, urging staff to support the changes to ease the process.
Job cuts are expected across several of Lycamobile’s other business ventures, which include property, media, and the Bella Cosa restaurant chain.
In 2019, Labour accused Boris Johnson of being “unfit” to serve as prime minister after reports emerged that he had attended a private dinner at Bella Cosa and met with Allirajah while seeking financial support for his bid to become Tory leader. The criticism stemmed from the fact that Lycamobile was under investigation for money laundering in France at the time.
Lycamobile had donated over £2m to the Conservative Party between 2011 and 2016, and Allirajah gave Johnson gifts worth £600 during his tenure as mayor of London, including flowers and a £100 birthday hamper.
Reports suggest that Allirajah is now pursuing a political career in Sri Lanka, where he aims to unite Tamil political parties.
A spokesperson for Lycamobile stated, “As with all UK businesses, Lycamobile continuously reviews its business model to ensure we deliver the best service to our customers. No final decisions have been made regarding changes to our model, but we have announced a consultation process aimed at aligning with our long-term growth goals and addressing the challenges faced by our business and other telecom companies, including a focus on digital transformation.
“Regarding our HMRC matters, we continue to proceed in accordance with our previous statements, and there are no significant updates at this time.”
