TalkTalk announces plans to sell direct B2B business, publishes annual financial results

25 May 2018

Alternative British broadband provider TalkTalk has announced plans to sell its direct B2B business to fellow UK internet and telecommunications services provider Daisy Group for a total consideration of GBP175 million (USD234 million). It is understood the pair have signed a Heads of Terms agreement, which would transfer all existing TalkTalk direct B2B customers to Daisy, including around 80,000 SoHo, SME and large enterprise clients – representing less than 20% of TalkTalk’s B2B revenues. Daisy is an existing strategic partner of TalkTalk, and it has been noted that all customers would continue to be served by the TalkTalk network. The transaction is subject to contract with the intention to complete in late July 2018, and Daisy has been granted a period of exclusivity to conclude it. Meanwhile, TalkTalk plans to retain and continue to grow its core strategic Partner and Wholesale business, offering services through over 800 channel relationships.

Commenting on the matter, TalkTalk chief executive officer, Tristia Harrison, said: ‘Last year we set out a strategy to radically simplify the business, focussing on fewer priorities that offer the best growth potential … This proposed deal would allow us to focus on growth in those core B2B markets, whilst also removing significant complexity and cost from the business.’

TalkTalk has also published its financial results for the year ended 31 March 2018, reporting a 1% year-on-year increase in headline revenue (which excludes turnover from carrier and off-net services) to GBP1.56 billion. Full-year turnover was, however, down by 4% against FY 2017 at GBP1.71 billion, which it attributed to ‘the company’s decision to reduce its activity in the low-margin carrier business and the expected continued decline in off-net revenues’, with the latter now only representing 1% of total group turnover. Headline EBITDA declined by 35% y-o-y to GBP233 million, in part due to higher operating and marketing expenses, with the company recording a net loss of GBP79 million for the year under review, compared to a net profit of GBP58 million in the twelve months to end-March 2017. CAPEX, meanwhile, was GBP128 million, representing 7.7% of headline revenues, with the expenditure primarily said to be for ‘continued investment and enhancement of [its] network capability and investment in [its] online systems to support the launch of new propositions’. Looking ahead, TalkTalk has said it expects CAPEX in FY 2019 to fall within its CAPEX/revenue target of 6%-7%.

In operational terms, TalkTalk said its customer base had increased by 192,000 in the year to 31 March 2018, compared to a decline of 49,000 in the previous fiscal year, with positive net adds in both the consumer and B2B sectors, taking the closing base to 4.139 million.

United Kingdom, Daisy Group, TalkTalk (incl. FibreNation)