TalkTalk has published their latest interim results for the 6 months to 30th September 2016 (H1 2017), which saw them lose fewer on-net broadband customers (-29,000) in the period to total 3,967,000 and 21% of those (779K) take their FTTC “fibre broadband” products (with 2,500 on FTTP in York).
Last year’s cyber-attack (hack) and massive personal data breach has weighed heavily upon TalkTalk all year and the ICO recently fined the ISP £400,000 as a result of the incident (here), but churn has now fallen back to 1.4% (down from 1.7% in H2 2016) and the provider seems to finally be turning a corner for the better.
On top of that the ISP has also increased both their Mobile customers to total 793,000 (up from 699,000 in H2 2016) and their “Fibre Broadband” (FTTC/P) base to 779,000 (up from 704,000 in H2 2016). As such the only major fall was in their standard broadband and TV base (TV fell from 1,389,000 in H2 2016 to 1,333,000 now).
Meanwhile both TalkTalk and Cityfibre recently announced a joint plan to extend their 940Mbps Fibre-to-the-Home (FTTH) based “Ultra Fibre Optic” trial broadband network in the City of York from 14,000 premises today to 40,000 over the next 2 years for an extra £20m (here).
Today’s report gives us a few tiny bits of new information to add to the October 2016 announcement, which we’ll summarise below.
Extra York Ultra Fibre Optic Trial Details
• Customer satisfaction scores for the UFO product are strongly outperforming FTTC, with scores consistently averaging over 80% with almost no customer churn.
• 14,000 homes passed were achieved at a per premise build cost of £417 (excludes the home installation).
• 2,500 TalkTalk and Sky customers taking service (18% of homes passed within just 6 months).
• Churn to date on the trial network reflects just 1 customer loss.
• 100% uptime since launch (TalkTalk says their unbundled MPF lines would expect 50+ faults over the same period).
• TalkTalk predicts “significant operational improvements to further reduce costs and improve marketing efficiency, which we will trial in phase 2 in York“.
Elsewhere TalkTalk also touches on the difficult subject of their on-going efforts to migrate Mobile customers away from their Mobile Virtual Network Operator (MVNO) agreement with Vodafone and on to the new O2 based platform, which has been a source of much frustration for the provider (example).
The ISP claims to have “made progress in the first phase of migrating from Vodafone to Telefonica MVNO, which involves moving existing mobile customers onto our new CRM and billing platform, and launching a 4G service on the Telefonica UK network for new customers.”
A number of milestone events are said to have been achieved over the past six months, including deploying their new platforms to live environments, provisioning their own TalkTalk 4G SIMs on the O2 network and successfully making live calls, sending SMSs, conducting data sessions and number porting with other MNOs. Bulk billing migrations and service launch on O2 will begin during Spring 2017, followed by network migrations.
Dido Harding, CEO of TalkTalk, said:
“We have delivered an excellent uplift in first half profits and expect to deliver materially higher full year profits than last year. One year on from the cyber attack, we have maintained a relentless focus on looking after our existing customers and keeping up the pace across a wide range of operational improvements to make TalkTalk simpler and better for customers. As a result we have seen significant year-on-year improvements in churn and customer satisfaction.
We are delighted with the initial response to our Fixed Low Price Plans, which offer customers simple, affordable and fair prices in an increasingly confusing market place. By allowing our existing customers to switch to these new plans, we are delivering a value for money proposition to our customer base that is genuinely unique in the market, and are laying the foundations for a fundamental transformation of the TalkTalk brand.
This combined with our ongoing focus on Making TalkTalk Simpler will drive a return to retail subscriber and revenue growth in FY18, supporting our confidence in the longer term prospects for the business.”
On the financial front TalkTalk reported total revenue of £902m for H1 2017 (down from £926m six months ago) and their Average Revenue Per User (ARPU) has similarly dropped from £28.91 to £28.05 over the same period. The only aspect of revenue that improved was for their corporate services, which jumped from £196m to £208m over the same period.
TalkTalk also reported an unaudited headline operating profit of £60m (£35m after tax) for the six month period, which is well up from £25m (£11m after tax) on the same period last year. However over the same period the ISPs Net Debt has gone from £631m to £847m and their operating free cash flow is now sitting at -£28m (last year they had £31m to use).
Finally, it’s worth checking out the ISPs latest investor results presentation as this sheds some light on customer feedback and future plans. According to that, TalkTalk plans to invest £40m over 3 years to expand their capacity and “drive down our long term backhaul costs by £20m p.a.“.
The same presentation notes how they plan an “extension of dark fibre capacity from core network to collector (edge) will drive costs down as bandwidth expands exponentially” and they also claim that “more customers get the speeds they pay for on our network than any other“, although no proof of having tested every other UK network is provided to help confirm that statement.