TalkTalk Top 4.28M Broadband Subs as 1Gbps FTTP for York Set to Go Live

UK ISP TalkTalk has posted their latest results for Q1-2015 (calendar), which revealed that the provider added +47k broadband subscribers in the quarter to total 4,283,000 (sharply up from +15k added in Q4 2014). But there’s bad news for some of the recent off-net (BT based) broadband customer gains from Virgin Media and Tesco.

The total also includes 479,000 taking their “Superfast Fibre Broadband” (FTTC), which is up by +83k in the quarter (down on the +88k added in Q4). It’s also worth noting that the total broadband subscribers figure includes 106,000 off-net customers (i.e. those using the BT based platform instead of their LLU unbundled network), which is down -2,000 on the previous quarter. Plus there were 226,000 off-net voice / phone line subscribers.

Readers might recall that this off-net customer base is being sold to little known ISP Fleur Telecom (Daisy Group) for a contingent consideration of £8m and generating a profit on disposal of £5m, which should complete by the end of spring and so still shows up in their Q1 results.

However it looks as if the deal with Fleur Telecom has since been extended to include any off-net additions that TalkTalk have gained as a result of their recent Tesco Broadband and Virgin Media (Virgin National ADSL) acquisitions.

TalkTalks Latest Statement on Fleur Telecom

As at 31 March 2015, the Group agreed to sell the acquired off net broadband base from Virgin Media and Tesco to Fleur Telecom Limited. The transaction is expected to complete in the year ending 31 March 2016. These bases therefore met the definition of asset held for sale under IFRS 5 and has been included as part of trade and other receivables balance on the Group consolidated balance sheet (£1m). The carrying value of these assets was based on the selling price of the disposal transaction therefore no gain or loss is recognised as a result of this classification.

Elsewhere there’s a useful update on the roll-out of 1000Mbps capable Fibre-to-the-Premises (FTTP) broadband in the city of York, which is being conducted alongside Sky Broadband and CityFibre.

Apparently TalkTalk now anticipates that their first customers will be connecting / migrated during the Autumn 2015 window, with 1,200 premises of the 20,000 required under phase 1 already covered (note: TalkTalk originally contributed £5m to help pay for phase 1 and around £3m of this has already been committed).

TalkTalks York Rollout Update

We have made good progress on the groundworks for our York Fibre to the Premise (“FTTP”) trial, with 1,200 homes passed in the first dig area, and are on track to launch our proposition soon and begin connecting customers in the autumn. Early indications of build costs are proving to be in line with our target of under £500 per home passed.

Based on our experience to date, we remain confident about the potential to roll out FTTP in scale. At a build cost of under £500 per premise passed and 30%-40% take-up, we believe it will be possible to build a c10million household network across the UK. We see ultrafast as an opportunity to build a mass market, value for money proposition that delivers value for consumers and shareholders through keen pricing and rapid scaling.

Our preliminary discussions on financing such a scale roll out have been positive, underscoring our confidence in the opportunity for building an economically viable, alternative and superior fibre infrastructure to that available today.

Lest we not forget the other parts of TalkTalk’s business, with their YouView (IPTV) based TV product reaching a total customer base of 1,414,000 (up by just +82k in the quarter vs +115k in Q4 2014).

At the same time their Mobile customers increased by +66k in the quarter to total 464,000 and that’s up on the +50k added in Q4 2014 and +40k before that (we wouldn’t be surprised to see this rise further in Q2 2015 with the new £12m unlimited SIM-Only deal).

Dido Harding, CEO of TalkTalk, said:

“We have delivered on our revenue growth guidance as planned, and have exited the year with our strongest ever quarterly revenue growth of 6%, and our lowest ever level of churn. British consumers and businesses increasingly appreciate TalkTalk’s value for money products, and we are focused on improving our customers’ experience still further and growing our already flourishing quad play business.

We are upgrading our revenue CAGR target to FY17 to 5% and are on track to deliver our 25% EBITDA margin target in FY17. Beyond FY17 we expect to continue to grow revenues by at least 5% per annum and we are excited about the opportunities that building an ultrafast fibre network and scale inside out mobile network will bring.

We believe firmly that competition will drive the innovation and investment that Britain needs in this essential infrastructure and urge the respective regulatory bodies currently reviewing the various mergers and industry structure, to put strong competition at the heart of their decisions.”

On the financial front TalkTalk reported total annual revenue of £1,795m (up from £1,727m one year ago), while annual profit after tax stood at £76m (up from £61m one year ago) and churn held steady at 1.3%. Churn will fall further once their old off-net base is completely sold because that accounted for much of the on-going customer bleed.

Curiously TalkTalk also claimed that their customers downloaded an average of 17.28GB (GigaBytes) per day, per customer and this seems odd since the previous results claimed that the full monthly average for December 2014 was said to be a more plausible 55GB. Mind you TalkTalk are known for getting their Gigabits and GigaBytes mixed up.