ISP TalkTalk Falls to 4.1M On-net Broadband Users and Offers Incentives

After the recent cyber-attack TalkTalk, which dubiously skipped their previous Q2 2015 report (here), has today published a financial update for Q3 2015 (calendar) and revealed that they’ve lost -80K broadband subscribers in the past 6 months to make for a total of 4.1 million (on-net).

It’s fair to say that TalkTalk has recently had quite a rocky ride. A big part of that occurred over the past few weeks, following the cyber-attack (here). On top of that the sale of their off-net base to Fleur Telecom (Daisy Group) has worked to counter some benefits from the recent Virgin Media + Tesco additions (here) and lest we not also forget this year’s steep price hikes (here).

Unfortunately the recent troubles have all conspired to whitewash over some of their more positive developments, such as the first customers going live on the new 940Mbps capable FTTP fibre optic broadband network in York (here). In any case we’re not surprised that today’s results reflect a more sombre mood.

TalkTalk’s FTTP Progress Update for York

We have made good progress with Ultrafast, our fibre to the premise trial in York with 262 triallists signed up from the 3,328 homes in the first phase of the build and registrations from the wider build area covering 6,000 homes, running at 50 per week.

Sadly TalkTalk has adopted a much more vague reporting style, which doesn’t offer a clear breakdown of broadband subscribers and as such we are having to do our own calculation based upon the last results from 6 months ago (here), when the ISP reported a total broadband on-net and off-net base of 4,283,000 with +15K being added in Q1 (calendar).

Since then the ISP claims to have lost 80,000 on-net broadband subscribers (apparently 72,000 of those were “non-paying customers” as a result of changing the late payment policy from 180 to 90 days). As for their off-net base (recorded as 106,000 in Q1 2015), many of those have now either migrated away or been moved to Fleur (note: 90,000 remain via their business division).

However TalkTalk says that “for the purposes of external reporting, we will no longer report the off-net base“, which means that we too will now only reflect the on-net figures. In that sense our total subtracts both the -80,000 on-net decline and all -106,000 off-net from the Q1 report.

Otherwise today’s total includes 578,000 taking their “Superfast Fibre Broadband” (FTTC) service, which is up by +99K in the last 6 months (technically much worse than the +83K added in Q1 alone). Demand has apparently been helped by the introduction of the self-install option, with over 90% of H1 connections being self-install.

Dido Harding, CEO of TalkTalk, said:

“We have delivered H1 results in line with our plan and revenue growth accelerated strongly through the second quarter. We have a robust plan to deliver a significant step-up in profits in H2, underpinned by the benefits of our transformation programme coming through strongly.

We have recently been able to confirm that far fewer people were impacted by the attack than originally feared. However, TalkTalk takes the security of customers’ data extremely seriously and we are taking significant further steps to ensure our systems are protected, as well as writing to all our customers outlining what we are doing to keep their data safe. In recognition of the unavoidable uncertainty, and because we know that doing what is right for our customers will ensure the best possible outcome for the company over the longer term, we are today announcing the offer of a choice of free upgraded services to all our customers.

TalkTalk is well established as the value for money provider in the fast growing quad play market and, notwithstanding the recent attack, remains well positioned to deliver strong and sustainable long term growth.”

The ISP clearly understands that its customers aren’t very happy right now and so they’ve also announced a raft of free upgrades (incentives) for their existing users. From 1st until 31st December, all customers will be able to add a selection of the following to their package “at no extra cost and with no additional commitment” (talktalk.co.uk/customerupgrade):

* TV content including movies, kids entertainment and sports.
* A mobile SIM with a monthly allowance of free texts, data and calls.
* Unlimited UK landline and mobile calls.
* A broadband health check by experienced engineers.

Elsewhere TalkTalk reported that they had added +132,000 new mobile customers in the last 6 months to make for a total of around 596,000. On top of that they also added 25,000 new TV customers during the half, taking the total base of triple-play customers to 1.4 million. Overall 16% of their customers now take mobile, with 39% taking TV and 16% on FTTC.

On the financial front the ISP reported total 6 month revenue of £912m (up from £871m in the same period last year), while annual profit after tax fell to just £11m (down from £27m in the same 6 month period last year). In fact profits are actually considerable worse at -£7m after tax if you include “exceptional charges and amortisation of acquisition intangibles“. Elsewhere they saw on-net churn of 1.5% (up from 1.4%) and ARPU of £28.08 (up from £26.45).

In addition, TalkTalk has now reintroduced their online ordering system and reduced the prices of their packages. All deals include a free wireless router, free calls between other TalkTalk users, free HomeSafe Internet security / Parental Controls, totally unlimited usage, an 18 month contract term and the included Talk2Go App. A quick summary of the new offers can be found below.

SimplyBroadband (up to 17Mbps)
Free for 18 months, £7.50 per month thereafter

Fibre Broadband (up to 38Mbps)
£5 a month for 18 months, £10 thereafter

Plus TV
Get Broadband, premium TV (6 Sky entertainment channels included), anytime calls and a mobile SIM
£10 a month for 18 months, £20 thereafter

Essentials TV
Get Broadband, TV and anytime calls
£7.50 a month for 6 months, £10 thereafter

UPDATE 9:17am

The financial impact of the cyber-attack in FYMar16 is also estimated as being around £30-35m and it’s worth considering that next to the ISPs weak profits.