Exodus at TalkTalk as customers quit for broadband upgrades

Telecoms group loses ground to rivals amid heavy cost-cutting drive



TalkTalk has been hit by an exodus of customers as the struggling broadband business loses ground to rivals.

The telecoms group, which is owned by billionaire Sir Charles Dunstone, saw its customer base fall by more than 400,000 to 3.2m in the year to February.

It comes amid heavy cost-cutting at TalkTalk, which narrowly avoided collapse last year after securing an emergency cash injection from Sir Charles and other shareholders.

TalkTalk slashed roughly 350 jobs in 2024, according to its latest accounts, with further cuts expected in the coming year.

This helped to reduce operating costs by around £18m, while the company also cut back its marketing and customer acquisition costs by £50m.

But the cost-cutting has led to further drops in customer numbers amid tough competition, as challenger “alt-net” firms offer more attractive upgrades.

While TalkTalk has traditionally been viewed as a cheaper broadband provider, it is now being undercut by rivals such as Vodafone and Sky.

In a further challenge, mobile provider Giffgaff, which is owned by Virgin Media O2, is trialling a new full-fibre broadband service priced at just £10 a month.

Meanwhile, TalkTalk burned through a further £285m last year, more than offsetting its £235m emergency cash injection.

While last year’s bailout secured the company’s short-term future, the company is still facing questions over its long-term prospects as it grapples with a £1.2bn debt pile.

The sharp drop in customers sparked a 7pc fall in revenues to £1.4bn, while this is forecast to fall further to between £1.25bn and £1.35bn in the coming year.

James Ratzer, an analyst at New Street Research, said the darkening outlook “makes the longer-term story considerably more challenging and further reduces the chance of corporate activity”.

TalkTalk’s financial troubles have fuelled speculation over dealmaking. The company split itself into three divisions in 2023 and has been seeking buyers for parts or all or part of the business.

Bosses previously held discussions with Australian investment giant Macquarie about selling a stake in the group’s wholesale division for up to £500m, but talks broke down and existing shareholders were forced to pump in their own money.

TalkTalk suffered a further setback in October when Deloitte resigned as its auditor.

In a rare public rebuke, the “big four” firm said it had repeatedly told bosses that internal controls over financial reporting were “not at the level we would expect for groups of the scale and complexity of TalkTalk”.

Despite the cuts, TalkTalk has said it plans to relaunch its offering to customers. It also expects to make further cost savings in the coming year, including by moving its customer base away from copper networks to full-fibre.

BT’s Openreach threatens to block new TalkTalk customers over unpaid bills



BT’s Openreach has threatened to block TalkTalk from putting new customers on its broadband network in a move that could derail the struggling telecoms operator’s turnaround efforts.

The warning, issued this week, is the latest step in an escalating financial dispute between TalkTalk and the UK’s largest broadband network.

The heavily indebted telecoms provider has missed several monthly payment deadlines to Openreach, its biggest supplier, because of cash flow issues, the Financial Times reported this week.

The late payments have varied in size but amounted to a “small percentage” of the total amount due, estimated at about £60mn per month, according to a person familiar with the matter. The person added the outstanding bills had now been paid.

TalkTalk, which currently hosts about 3mn of its 3.2mn customers on Openreach’s network, shed 400,000 customers in the year to February.

Last year, shareholders including Sir Charles Dunstone injected £235mn to help shore up TalkTalk’s finances and pay off a separate debt to Openreach.

That refinancing was precipitated by a similar threat from Openreach last year to block new customers, according to three people familiar with the matter. TalkTalk and Openreach declined to comment.

James Ratzer, analyst at New Street Research, said a move by Openreach to block new TalkTalk customers would be “unprecedented in the UK market” and would do “material damage” to TalkTalk’s efforts to turn around its business.

TalkTalk has struggled since it was bought by Toscafund, a London-based hedge fund, in a £1.1bn leveraged buyout in 2021 that added £527mn of debt to its balance sheet.

The Salford-based company secured extensions to about £1.2bn of its existing debt as part of a refinancing in December. As part of that agreement, its bondholders can take control of the group unless it has at least £20mn in cash available at the end of every quarter.

New Street Research estimated TalkTalk had £42mn of cash available at the end of February. TalkTalk’s shareholders could inject further capital into the business if required, according to a person familiar with the matter.

Last month, in a call with analysts, TalkTalk indicated it may suffer a net loss of a further 300,000 customers this year. However, that forecast was predicated on the company attracting 100,000 new customers — a target that could be out of reach should Openreach refuse to host new business.

TalkTalk’s £562mn of senior secured bonds were trading at 46 pence on the pound on Friday. Its junior bonds were trading at just 11 pence in the pound, indicating that investors have doubts the company will be able to repay its debts.

The financial dispute between Openreach and TalkTalk is also raising concerns over the knock-on impact on BT Group, owner of Openreach.

BT chief executive Allison Kirkby acknowledged to analysts last month that “one challenged communications provider” had “caused headwinds” for BT.