UK ISP TalkTalk Confirm Acquisition of Tesco Broadband, Phone and Blinkbox

As predicted last week TalkTalk has this morning confirmed the acquisition of Tesco’s Blinkbox Movies (video streaming) business, but in a more surprising move they’ve also gobbled the supermarket giants budget fixed line broadband (75,000 subs) and phone (20,000 subs) customers. Apparently the assets have been acquired free of debt and as a single transaction for cash.

It’s no secret that Tesco have recently been suffering from a mountain of financial trouble and as part of that they’ve been looking to offload some of their less lucrative assets. The web-based Blinkbox video streaming service in particular has suffered in a market dominated by arguably more attractive and innovative offerings from Netflix, Amazon and NOW TV etc.

Tesco originally took ownership of Blinkbox for £3m in 2011. Since then the supermarket giant has added Blinkbox Books through the £4.5m acquisition of digital book service Modcast and they later paid £10.8m to gobble music streaming service WE7, which was turned into Blinkbox Music. But the service has struggled to make much money and its last financial report pointed to a combined post-tax loss of £24.7m on total revenues of just £3.5m.

Both Vodafone and TalkTalk were known to have an expressed an in the service (here) and today we learn that the latter has won, although the precise financial specifics are still unknown. In a canned statement TalkTalk said that the integration of blinkbox with our existing YouView (IPTV) based TV business would “begin immediately” through a restructuring of the combined platform. Apparently revenue synergies are also expected to flow from the end of calendar 2015.

In addition Adrian Letts, Blinkbox CEO and Co-Founder, will join TalkTalk as Managing Director for TV and report to Tristia Harrison, Managing Director of the ISPs consumer business. We’re unsure whether this is the best move, after all Blinkbox hasn’t exactly been a huge success and yet TalkTalk TV has managed to do quite well for itself.

But the real surprise in today’s news is that Tesco’s reasonably popular fixed line broadband and phone base has also been acquired by TalkTalk. The ISP said that this will enable them to “further leverage the superior scale and economics of our national network” and it follows a similar gobbling of Virgin Media’s 100k remaining copped-line based ADSL broadband (Virgin National / Virgin.net) customers last year (here).

Dido Harding, CEO of TalkTalk, said:

“Since launch TalkTalk TV has demonstrated its popularity with value-seeking customers to become the UK’s fastest growing TV service. We are excited about the opportunity that blinkbox’s platform and technology expertise bring, and which will significantly accelerate the development of our TV platform.

The purchase of Tesco’s broadband base is another example of TalkTalk leveraging its national network to grow faster. We are excited about the future of quad-play – fixed phone and broadband, TV and mobile – and this acquisition will help to further drive home our value for money advantage.”

Apparently Tesco’s broadband customers, which at the last check were still using Vodafone’s LLU telecoms network, will be transferred across to the TalkTalk platform “over the coming months” (i.e. completed by September 2015). Incidentally Vodafone are currently gearing up to launch their own consumer broadband package this spring.

Meanwhile Tesco has setup a couple of new Information Pages, which doesn’t say much but does see Tesco saying that “we currently feel that we are no longer in a position [to] provide customers with services where we feel we can provide the best possible value and service. We are confident that TalkTalk is best placed to offer products and services that our customers will love.”

Interestingly Tesco said that new customers are still able to sign-up to their broadband and phone packages, which is despite the inevitable confusion that will arise from a possible change of service a few months down the road. Sadly the move means no more Clubcard points after the migration and new Tesco Mobile customers who were offered “free broadband” as part of their plan will also lose out (no change for existing subscribers though, yet), although some sort of new promotion is planned for them in the future.

Meanwhile those who make use of Tesco.net email addresses should note that they will remain with Tesco and continue to operate as normal even once broadband and homephone customers have transferred to TalkTalk, although we wouldn’t be at all surprised if further down the line these vanished too.