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.

BT agrees rescue deal to buy broadband operator TalkTalk



The UK's biggest broadband provider, BT, has agreed to buy rival operator TalkTalk to save the company from collapse.

The takeover would end of months of speculation over the future of TalkTalk and mean services for its millions of customers will continue as normal.

BT boss Alison Kirkby said it provided "a safety net" for TalkTalk customers. The administrator, Alvarez & Marsal, said it also provided certainty for TalkTalk's 900 staff based in Salford, Greater Manchester.

However, Virgin Media called it a "stitch-up" which allows BT to "tighten its grip" over the market. The government has given itself the power to have the final say on the deal, citing its importance to vital public services.

TalkTalk has 1.5 million retail customers and one million wholesale customers across the UK.

BT's Kirkby told the BBC's Today programme: "Two and a half million customers, including vulnerable households, and key emergency services might have lost their services if Talk Talk had failed, which it was on track to do.

"So BT stepped in as we were the only viable option to take the business forward."

Ernest Doku from comparison website Uswitch said the deal means "nothing changes today".

"Your broadband and landline carry on as normal, and there is nothing you need to do right now," he added.

However, he said that BT should explain "quickly and plainly what this means for contracts, prices and service in the future, so nobody is left guessing".

The regulator, Ofcom, says broadband customers should have the right to leave a contract without an exit fee, external if a new owner puts the price up beyond what was in the contract.

TalkTalk began as a challenger to BT in the broadband market. It was listed on the London Stock Exchange, but was taken over by private equity in 2021.

Since then, the firm has built up debt while losing customers, leaving it unable to pay some of those it owes money to.

Despite this, TalkTalk remained the fourth biggest broadband provider in the UK, with 6.6% of customers, during the March to June period of this year, according to figures from analytic firm Opensignal.

BT has 32.5% of customers, Sky 19.9%, and Virgin Media 19.1%.

Rivals who were beaten to the deal by BT have said it will be bad for consumers.

Tom O'Hagan, a former TalkTalk executive who was leading a takeover bid for the firm, told the BBC he was worried about "reduced choice and potentially an increase in price for consumers and for businesses" because of the BT deal.

He added that he was particularly concerned about competition in the wholesale market, where TalkTalk's subsidiary PXC was BT's main rival.

Virgin Media, which has also reportedly tried to buy TalkTalk in the past, said the BT takeover has "all the characteristics of a stitch-up masked as a rescue deal in the public interest".

It added that the purchase means BT can "roll its tanks over competition and further tighten its grip on the market. The logic simply doesn't add up."

The Competition Markets Authority (CMA) will need to approve the takeover, which would give BT greater power over the broadband market.

Tom Smith, a competition lawyer and former legal director at the CMA, said the regulator will be balancing that concern with other considerations.

"When the CMA looks at it, it will look at what would have happened if the deal wasn't going through," he told the BBC.

"If TalkTalk would have exited the market, for example, then really any deal is better than TalkTalk exiting, but then there might be alternative bidders as well that would have been less anticompetitive."

However, the Department of Culture, Media, and Sport (DCMS) has given itself the power to make the final decision on the deal in the name of the public interest once the CMA has made its report.

DCMS has given the CMA until 19 October to deliver its verdict.

Culture Secretary Lisa Nandy said: "Phone and broadband services are vital national infrastructure.

"If TalkTalk services fail, there is a genuine risk to life and public services – including to hospitals, schools and emergency care. These are unprecedented circumstances that require action now."

BT has said it welcomed the intervention and would "work constructively with the government and the CMA during their review".

Judith Mackenzie, a partner at investment manager Downing, told the BBC that broadband was "not a regulated industry, unlike electricity and water, but it's also very important to business users and ourselves, consumers".

"It's almost like a commodity now, broadband," she added.

BT has said it will cost the firm £400m to buy TalkTalk out of administration.

This includes the purchase price, fees, TalkTalk's expected £60m loss for this year, and BT effectively writing off the £100m TalkTalk owes BT's Openreach business.

TalkTalk has £1.5bn of debt and made a £100m loss last year.

TalkTalk has £1.5bn of debt and made a £100m loss last year.

Not from what the shysters charged me!