Positive results for TalkTalk in FY11 despite broadband subs decline

20 May 2011

UK-based fixed line and broadband provider TalkTalk saw earnings before interest, tax, depreciation and amortisation (EBITDA) rise by 24.9% to GBP276 million (USD446 million) in the twelve months to end-March 2011, despite a continued decline in its high speed internet subscriber base. For the financial year ended 31 March 2011 TalkTalk also revealed revenues of GBP1.765 billion, representing a 4.7% year-on-year increase against the previous year, while profit before tax for the period was GBP57 million, up from GBP11 million. Looking further forward, for the next twelve-month period TalkTalk has said it expects turnover to be broadly flat, with broadband revenue growth likely to be offset by a continuing decline in non broadband revenues. An EBITDA margin of between 17.0% and 18.0% is expected meanwhile, up from the 15.6% reported for FY2011.

The positive financial results came despite TalkTalk reporting that it had seen a net reduction of 25,000 broadband subscribers during the fourth quarter alone, the same decline as it had reported in the previous three-month period. However, TalkTalk pointed to an increased spending by its customer base as having helped offset the decline in customer numbers; broadband average revenue per user (ARPU) in the fourth quarter of the operator’s fiscal year was GBP25, up from GBP23.6 a year earlier. Further, TalkTalk pointed to the continued growth in customers now active on its own network, although it did reveal that in January-March 2011 there were just 36,000 on-net customer additions compared to an average of around 150,000 in each of the previous three quarters. The lower number, it said, was a result of having completed a previous phase of network expansion earlier than planned, which it claimed had enabled it to accelerate the customer migration schedule. The operator also said that the next wave of new unbundled exchanges is expected to come online during the first quarter of its upcoming financial year, following which it expects the pace of migration to increase once more. At end-March 2011 TalkTalk had a total broadband subscriber base of 4.199 million, of which 85.9% were connected over its own unbundled network.

Commenting on the results, TalkTalk chief executive Dido Harding noted: ‘We exited the year with momentum, and we intend to build this further through the year and make major progress towards our medium-term targets of 20% EBITDA margin and 2% revenue CAGR. In the year ahead, our continuing focus on unbundling and restructuring, and on giving our customers best value-for-money services, will enable us to grow our EBITDA margin to 17-18%.’

United Kingdom, TalkTalk (incl. FibreNation)