TalkTalk Looks for a Turnaround

Hopes Fibre Roll-Out Projects Will Unlock Growth

Yesterday, TalkTalk announced its financial results for the period ending 31 December 2017. In usual fashion, the company provided a trading update that revealed limited information. Overall, I believe that it was a decent set of results and that the new management team is doing a good job of turning the business around.

During the third quarter of its fiscal 2018, TalkTalk won 37,000 new customers, which compares much more favourably with the loss of 42,000 subscribers for the same period in 2016. It now has over 1.8 million customers who have signed up to its consolidated all-in-one pricing options, accounting for 61 percent of its total customers. Consistent with previous quarters, TalkTalk saw strong growth in fibre with net additions of 89,000, an improvement of 15,000 on the same quarter a year earlier. Worryingly, TalkTalk didn't offer any guidance in areas such as TV, suggesting that total numbers have fallen. This wouldn't come as a surprise and it would reflect losses seen at BT in the same period.

The big news is that TalkTalk plans to roll out fibre broadband to more than 3 million homes and businesses in "mid-sized" towns and cities in the UK. To facilitate this, it will create an independent company with Infracapital, the infrastructure equity investment arm of M&G Prudential, and will need to raise more than £500 million. The new entity will be 80 percent owned by Infracapital and 20 percent by TalkTalk. The operator aims to raise £200 million by selling shares, in part to help fund this fibre broadband roll-out. The move builds on its fibre-to-the-premises trial in York, which currently reaches 14,000 homes and is being extended to 54,000. It's an interesting effort as TalkTalk recently announced it was ditching its mobile virtual network operator operations in favour of what appears to be a programme to quickly expand its fibre broadband business.

This is consistent with moves from rivals to launch fibre broadband services. In November 2017, Vodafone signed a wholesale deal with CityFibre to offer fibre-to-the-home services to up to 5 million premises by 2025. Vodafone will invest in CityFibre's network to secure a period of exclusivity to market broadband services on the network. This is a direct challenge to BT, from which Vodafone is currently leasing capacity to support its broadband offering. To appease regulators and rivals, Openreach announced plans to ramp up the roll-out of its fibre network by 50 percent to 3 million premises by the end of 2020. This is part of what it calls its "Fibre First" project. The first eight cities to see deployment are Birmingham, Bristol, Cardiff, Edinburgh, Leeds, Liverpool, London and Manchester, and the programme will eventually cover 40 towns and cities in total.

Although it seems clear that growth in the UK is extremely challenging to achieve, there are opportunities in new-build developments and especially fibre broadband. Virgin Media's results for the third quarter of 2017 underline the huge push the company is making with Project Lightning. It added 147,000 new premises during the quarter to take its total connections to 943,000. More than 60 percent of its net additions came from its new-build business. These latest efforts in fixed-line networks are great news for the UK market, with most providers committing to getting fibre into people's homes.

In my opinion, the road ahead remains treacherous for TalkTalk. I applaud the company for making a bold move by dropping its mobile virtual network operator ambitions to focus on other areas. However, the investment drive will put a drain on its resources, so I expect it to announce further initiatives to cut costs. Attention will now turn to Liberty Global's latest quarterly results, which I expect will be fascinating in light of the recent interest that Vodafone has shown in buying some of its European assets (see Instant Insight: Vodafone and Liberty Global Reopen Asset Negotiations).

This entry was posted on February 9th, 2018 and is filed under Services. You can follow any responses to this entry through the RSS 2.0 feed or you can leave a response.

Posted By Paolo Pescatore On February 9th, 2018

(There are no comments yet)
Leave a Comment

Hot News

Team Tweets

CCS Insight
Recent study sparks fresh concerns about excessive phone use, as blue light from screens may be much more harmful t…
Follow CCS Insight
Shaun Collins
Congratulations Conor and Harvey. Brilliant effort from the lads, 49 mins and all in an really worthwhile cause.…
Follow Shaun
Ben Wood
RT @nickmcquire: As we predicted last year & will show at #ccspredicts in a few weeks, it has turned up a notch again in 2018 with implicat…
Follow Ben
Martin Garner
Great briefing yesterday from @qualcomm's @wellingmax on the need for energy-efficient AI with edge computing. The…
Follow Martin
Geoff Blaber
Crypto mining has been a consistent thorn in Nvidia's side. When demand was up it upset core customers. Now it's do…
Follow Geoff
Marina Koytcheva
@caro_milanesi Ah yes :) My mum grows zucchini and stuffs flowers with rice- delicious!! Do you grow your own zucch…
Follow Marina
Nicholas McQuire
As we predicted last year & will show at #ccspredicts in a few weeks, it has turned up a notch again in 2018 with i…
Follow Nicholas
Angela Ashenden
Chuckling watching Five Star’s System Addict on old #TOTP2.. in some ways it’s quite prophetic, if you can get past…
Follow Angela
Kester Mann
DT in an apparent swipe at United Internet, which is considering bidding in the upcoming German 5G auction and then…
Follow Kester
George Jijiashvili
For the Galaxy Note 9, Samsung is offering £300 trade in discount in addition to 0% finance to the owners of Note 8…
Follow George
Laura Simeonova
RT @benwood: P20 devices testament to Huawei's ambition in smartphone market. Consistently improving design, capabilities and appeal of its…
Follow Laura
Katie Taylor
Opt-out donation plan 'will not increase donors' - why you should let your family know your wishes
Follow Katie

Recent Blog Posts

Blog Post
Serious Concerns about Blue Light from Screens Researchers Say Extended Exposure Could Accelerate Blindness... Read more
Blog Post
Starry Internet, the Sequel Start-Up Launches Its Wireless Internet Service across the U... Read more
Blog Post
India's Ola Announces UK Push Ride-Hailing Company Looks for a Gateway to Europe Last wee... Read more
More blog

Latest Company News

Blog Post
Angela Ashenden Joins CCS Insight to Lead Business Collaboration Research Enterprise Research Coverage Continues to Expand ... Read more
More news