ISP TalkTalk Propose Full Fibre Broadband for 3 Million UK Premises
Budget ISP TalkTalk has confirmed that they are in “discussions” with Infracapital over a plan to jointly create an independent company, with a total investment of around £1.5bn, that could provide 1Gbps ultrafast “full fibre” (FTTH/P) broadband to over 3 million premises in mid-sized UK towns and cities.
The debt laden operator revealed the proposal as part of their latest trading update to the end of 2017 (Q3 FY18). Under the plan the new company would be 20% owned by TalkTalk and 80% by Infracapital, which could involve a potential equity investment of up to £500m (enabling total investment of c.£1.5bn); InfraCapital contributing £400m and TalkTalk £100m (the new company will then take on c.£1bn in debt). InfraCapital is the infrastructure equity investment arm of M&G Prudential.
At present the details are somewhat thin on the ground but TalkTalk said they would be a “founding wholesale customer of the new company, providing a minimum volume commitment” (i.e. the anchor tenant), which suggests that other operators may be involved. “Key to this will be a competitive wholesale price and fast customer take-up,” said the ISP.
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Charles Dunstone, Executive Chairman of TalkTalk, said:
“It’s 12 months since I announced my intention to take a more active role in the management of TalkTalk. Since then, we have reset the business and returned it to quarter-on-quarter customer growth.
By signing heads of terms with Infracapital we are making good progress towards putting TalkTalk at the heart of Britain’s fibre future by building a full fibre network, bringing faster, more reliable internet to millions of homes and businesses.
Looking ahead we see real opportunity to continue growing the core business whilst also investing in full fibre. We have therefore strengthened our balance sheet and temporarily reduced our dividend to take full advantage of the opportunities available.
We anticipate revenue growth and strong earnings growth in the year ahead, as the benefits of a growing customer base and rigorous cost control begin to deliver the results this business is capable of.”
At present TalkTalk already has a Fibre-to-the-Home (FTTH/P) style Gigabit broadband network pilot in the City of York, which was initially built alongside Cityfibre and Sky Broadband. The York network currently covers about 14,000 homes and is already in the process of being expanded to reach 54,000 premises by the end of 2020 (note: Sky has stopped investing in the York extension).
Back in 2016 TalkTalk said its build costs for the York network had been established at below £500 per home passed (this doesn’t include the final home install) and they claimed to be “increasingly confident of reaching our targeted penetration rate of 30%‐40% and delivering the proof of concept required to expand beyond York” (here).
The new network will naturally be built independently of Openreach, which the ISP said would bring some “much needed competition to the market.” Dare we say that the market for FTTP/H is actually starting to become crowded, not least with big announcements from Openreach (here), Vodafone + Cityfibre (here), Hyperoptic (here) and Virgin Media’s on-going rollout all seeming to be competing over some of the same urban areas. Not to mention the smaller players like Community Fibre etc. We wouldn’t be surprised to see some consolidation in the market once full fibre networks expand.
However at this stage the rollout plans have not been completely fleshed out by alternative network providers and so we don’t know how much overlap will actually exist. Certainly we’d hope that the ISPs will try to minimise incidents of multiple overlapping fibre optic networks, which could also create an ugly civil engineering situation for locals (i.e. pavements being repeatedly dug up).
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Matt Hancock MP, DCMS UK Secretary of State, said:
“We strongly welcome this commitment by Talk Talk to take full fibre broadband to 3 million homes and businesses in the UK. This investment will make significant strides in giving Britain the connectivity we need to be fit for the future. It’s fantastic to see Talk Talk stepping up to the plate – we want a healthy, vibrant, competitive next generation broadband market and are working hard to deliver the investment and good jobs that comes with it.”
At present TalkTalk has not confirmed where the new network will be deployed, although further information is expected to be provided “shortly.” In keeping with the FTTH plan they have also proposed a new equity placing (intention to raise up to £200m by way of accelerated bookbuild), which will see the Executive Chairman and other Directors participate by contributing up to £40m. Dividends have also been cut to help pay for the work.
Meanwhile the rest of their Trading Update was quite vague (this is normal as they usually only give detailed updates every 6 months), although we note that they added a further 89,000 “fibre” (FTTC and a few FTTH/P) customers during the quarter and delivered total on-net base growth of +37k across all products. On-net churn also fell to 1.3%.
Elsewhere TalkTalk Business Ethernet & EFM base grew by 1.8k new lines (total of 48,000) and overall headline group revenues hit £388m (excluding Carrier of £20m and Off-Net of £6m), which increased by 1.0% year-on-year during the quarter. On-net revenues at £316m were flat on the same period in the prior year.
The biggest challenge for TalkTalk will be delivering on its full fibre commitment, while at the same time as dealing with high debt and profit warnings.
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Mark is a professional technology writer, IT consultant and computer engineer from Dorset (England), he also founded ISPreview in 1999 and enjoys analysing the latest telecoms and broadband developments. Find me on X (Twitter), Mastodon, Facebook and Linkedin.
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Wow I didn’t expect this to happen seems like sky is going be the only one not in the FTTH game.
I get your point with regards overlapping but Ofcom will need to keep a close eye on things to make sure we have competition locally and that consumers don’t end up with little/no choice at the retail level. e.g. Town A only has access to TalkTalk/Infracapital, Town B Vodafone/Cityfibre etc.
Ofcom are unlikely to take much or any action while alternative network operators are fairly small and using their own private investment. It takes a lot of money and risk to do what they’re doing, so they’ll leave well alone and allow the commercial market to evolve. Even larger operators like Virgin Media face very little in the way of regulation.
Almost any attempt to increase regulation at this stage is likely to severely curtail FTTP investment. Better to let the market develop and see what happens – as mark says it will no doubt consolidate at some point on its own. Better to take at judgement at that point
It’s like the wild west days of cable where every man and their dog wanted to be in the game and the net result was Virgin Media.
There will be tears here.
The competition will be between Internet access over Talktalk’s FTTP, BT’s Copper services, 4 mobile networks, satellite and maybe Virgin. I think Ofcom would argue it’s not reasonable to view FTTP access as a monopoly in its own right.
Something which is small in number (Like FTTP is and still will be and as MarkJ mentions) and which has more than a single player (Like FTTP has) is not a monopoly.
Good news though a certain poster can stop whinging about TT not doing Fibre rollouts. LOL
As you mentioned overbuild is a potential issue here; it would make a lot more sense for the various companies mentioned to combine their efforts and build a real alternative to OpenReach & Virgin Media.
If they do all go their own way it’s inevitable that eventually there will be consolidation via mergers & acquisitions anyway, with the downside of the having to support a number of differing network infrastructures.
In fact the best solution for consumers would be an acquisition or investment in Virgin Media that results in VM being split into a retail content provider and wholesale network provider for all ISPs. With a substantial investment in the VM network to provide sufficient capacity to actually support the ultrafast speeds they sell, they could certainly give OpenReach a run for their money.
We have the option of VM broadband where I am at faster speeds than the 50mbps I currently get via Openreach, but I’ve never been tempted due to their reputation for congestion at peak times and also the fact that you are tied to effectively a single ISP.
Your first option is what gets called, in courts, a Cartel.
How so?
“As you mentioned overbuild is a potential issue here; it would make a lot more sense for the various companies mentioned to combine their efforts and build a real alternative to OpenReach & Virgin Media.”
“Your first option is what gets called, in courts, a Cartel.”
Agreed so BT can stop asking others for investment and help to deploy FTTP cant they?
The more merrier at this point – OR should have started full fiber deployment wayback
What’s a little frustrating about all these FTTP announcements is that they are almost all targetting areas which will have either an existing full fibre option or G.Fast coming. They won’t hardly increase the reach of ultrafast beyond what BT are doing anyway and won’t help all those who can still only get ADSL.
I work in a city location where there are now 3 separate full fibre broadband providers available, but I live outside the city in a village where we can only get 6mb ADSL!
While there is overlap there is also substantial new coverage. This work is bound to bring some new rural improvements; by driving fibre to the edges of cities/towns the nearest fibre terminations get closer to villages and therefore the costs for there upgrade fall.
I share your frustration. I understand the commercial realities, but seeing towns and cities that are already relatively well served being targeted for FTTP while areas with only ADSL are left to rot is depressing. Those of us in those areas have no choice of technology, very very limited choice of ISP, and pay over the odds for what we do get. The first company to reach such areas will clean up. Gigaclear are due to come to may area, but won’t start the build for another 2 years or so (but since it is planned it prevents businesses receiving help to pay for a leased line – aargh!)
That’s the commercial reality though Bish. Consumers aren’t prepared to pay much of a premium, if any, for broadband better than ADSL and so investments are driven to areas where a rollout passes lots of premises per mile of fibre laid and where demographics suggest customers can pay for your services.
All the competing companies do the same geoanalyses to support those investments and they all give the same answers. Why would any business choose to invest where it will make less money than it otherwise could?
Government subsidy can go some way to improve the situation, but the requirement to wholesale is a red line to a lot of potential players – their sums tell them that they’d make more money with a smaller network where they get all the revenue than a larger, subsidised one where they have to share with other ISPs.
“That’s the commercial reality though Bish. Consumers aren’t prepared to pay much of a premium, if any, for broadband better than ADSL…”
So you are saying FTTC with takeup of 50%+ in some areas is an example of people not wanting to pay for better than ADSL? Explain that more please.
Not all cities have this situation.
I live in a city, and we have FTTC and virgin media cable, but no g.fast and no FTTP. My city is not on openreach’s announced FTTP list.
Virgin Media around here has been poor in almost its entire history with congestion issues, so I dont consider it a viable ISP to choose from meaning we just have FTTC really. Hopefully talktalk target the smaller cities that openreach ignored.
Very welcome news. The more fibre the better.
This will give OR another kick up the backside as their 3 million target is starting to look very low to me. That is what you get for letting grass grow under your feet.
@ The Archbishop
Our company run a lot of construction sites in Central London that can only get ADSL and these are people who would cheerfully pay to have better broadband and where the cables are nailed to the front of Mews properties, yes really, so they are very accessible. Those kind of places are not on the FTTC map never mind the GFast map because of the long wonky cable runs. On a lot of them you are lucky if you can get 6Mb download.
According to TBB, 96.8% of premises in London can receive superfast speeds and over 70% can receive ultrafast speeds.
I wonder what the statistical probability is that ‘a lot’ of your construction sites are in the 3.2%.
@AndyH
What I love is the way you use facts!
Most mews in Central London are face wired – ie the wires run along the face of the properties and the line lengths are therefore over the 400m threshold. In most of these cases the wiring is very old and goes though lots of ancient JB’s.
So these kind of places are the orphan child of OR’s network as VDSL would not work very well on that kind of copper. But they also just happen to be where a lot of high spend domestic construction activity has been centred over the last few years. Some of the mews houses are surprisingly big.
So the people who have the chops to pay for FTTP can only get ADSL as they are not even in the FTTPoD umbrella. And before you ask we have tried asking OR many times. No can do as the deemed wayleaves only cover copper often not other technologies as there are very often Estate Consents to consider as well as freeholder consents.
Mews – which sounds like Mayfair area to me and voila
https://labs.thinkbroadband.com/local/broadband-map#15/51.5066/-0.1421/openreach/geafttp/hyperoptic/virgin/
Notice all the gaps in superfast coverage
@ Andrew Ferguson
I think you have put your finger on the buzzer there!
Seriously our clients simply cannot belive it when we tell them they are stuck on ADSL and they want to run a trading platform out of their house. And yes some of them sort leased fibre but that is a crazy jump in cost and time impediment to getting thins done.
I’m confused – you say Openreach need a kick, then you mention sites in London that can’t get decent speeds. But – you then say that those issues are down to the freeholders and estate owners not giving consent for new kit. Is It Openreach’s fault or not? Are people like Hyperoptic or Gigaclear willing to deliver fibre?
I use to buy a lot of business connections in London, so different set of suppliers, but there were literally a least a dozen suppliers I could use, each with their own, owned cables in the ground. Would any of them serve your new buildings?
A_Builder Are the news lines you mention exchange only lines? If so, that would help explain the current lack of FTTC and FTTPoD..
Im not sure TBBs data is correct anyway, in places in contradicts itself.
If we take the area of Mayfair which Andrew refers to…
https://availability.samknows.com/broadband/exchange/WEWMAY
(NOTE NO FTTP OR FTTC at exchange according to this)
and here…
https://labs.thinkbroadband.com/local/postcode-search-W1J%205RR
things seem to be confused. The TBB data at the top agress with samknows and states…
“Fibre (eg FTTC/VDSL2/FTTH/Cable/G.Fast) X”
along with “You do not appear to have any Openreach Fibre products available to you.”
Scroll down on that TBB page though and it suddenly states (when combined) there is around 50% coverage of FTTC (Openreach 30Mb and higher) and FTTP.
I wonder how BT are doing that at an exchange which postcode i entered “W1J 5RR” (IE the BT exchange location in Mayfair, westminster). When it has no FTTC or FTTP??????????
The only or at least majority figure for SUPERFAST AND ULTRAFAST in that area should be from Virgin.
Regardless though it doesnt matter as London as a whole only has around 3% of FTTP covered…
https://labs.thinkbroadband.com/local/london
SO id say anyone that deploys FTTP anywhere in London will be doing it a favour.
Unless that London figure is also wrong.
What is the problem?
The coverage pie charts are NOT for that individual postcode, but carry what I would presume are fairly clear titles e.g.
City of Westminster
Cities of London and Westminster Constituency
And as such the Mayfair exchange is just one of a number in each of the well recognised areas.
An example of what happens in central London, you can get 100 postcodes that service 75 business premises, and then 3 postcodes that cover 150 flats and in London some of these postcodes are stacked on top of each other.
Early morning typo 100 business premises in 75 postcodes was what I meant to type
Sunil Sood
No they are not EO’s in the main. The issue is cable condition/length.
Essentially OR are not interested as it is a bit difficult and so the Estates have gone with Giga, Community etc who want to solve problems. As it is in the Estates interest to have functional infrastructure and they enough commercial nous to realize that some buying a £2M+ house (and that is the low low end on price) expects excellent connectivity otherwise it is a deal breaker.
The alt nets have done good work backfilling those area. None of that demographic would blink at spending £300pm on a connection.
To be clearer…
http://maps.thinkbroadband.com/?utm_source=mainsite&utm_medium=navigation&utm_campaign=maps&utm_content=footer#!lat=51.51181334772655&lng=-0.16359510000006594&zoom=13&type=terrain&openreach-fttp
The grey blobs is all the FTTP coverage in the entire Westminster area.
London as a whole only has around 3% of FTTP covered…
https://labs.thinkbroadband.com/local/london
Any ULTRAFAST coverage in London (100Mb+) certainly is not FTTP as some here try to indicate.
“Any ULTRAFAST coverage in London (100Mb+) certainly is not FTTP as some here try to indicate.”
Not sure I understand…
https://labs.thinkbroadband.com/local/broadband-map#14/51.5021/-0.1163/geafttp/hyperoptic/vfm/community/
Your statement is incorrect, since there is some FTTP then the ANY test fails. It is the case though that the majority of the ultrafast (100 Mbps+) options in lots of the London Boroughs is from the Virgin Media presence.
That last paragraph should had read…
“Any “””significant””” ULTRAFAST coverage in London (100Mb+) certainly is not FTTP as some here try to indicate.”
The majority of ultrafast is (as previously stated and as you have just stated) down to VM.
Well this is getting interesting. TalkTalk to expand their FTTP rollout beyond a few homes in York.
(I notice they say premises passed in York not premises with active TT FTTP contracts so I wonder how successful York has been for TT)
As TT have not said where they are planning to roll out to, can I suggest the dessert of FTTP that is Milton keynes?
I mean, we are struggling with only having Openreach, Vodafone, IFNL and allegedly Virgin so please add MK to the list TT. The more the merrier.
I would say MK is almost certain to be up there.
Most of TT’s customers in MK in non-FTTC areas will be on sub 5 Mbps ADSL. A significant percentage will already be covered by Openreach’s FTTP network, so I imagine the opportunity is there for TT to cover some of their minimum volume commitment.
I guess today’s announcement further strengthens the case that TT won’t be supplying FTTP over Openreach’s network.
“debt laden” – perhaps they should address that *before* spending more money than they appear to have on other things …
The board may want to out Carillion Carillion so as to get their moment of fame.
It does seem odd that they wish to put more debt into the company. However the more you owe, the less chance the banks will foreclose. Too big to fail.
Being in debt makes them no different than Virgin and BT who continue to spend.
I guess there’s different levels of debt. They can’t even afford to pay their dividends out of their own pockets can they?
How much debt does TT have and how much does BT have then?
How much cash flow does TT have and how much does BT have?
I was not aware either company released cash flow availability figures, could you perhaps link to both organisations debt and cash flow figures?
I suspect they are in similar positions, one having more debt but more cash flow availability than the other and the other being vice versa to that.
No, but I’m happy for you to provide me with info on which out of BT , Virgin and TalkTalk investors thing is a good bet.
Do you really think TalkTalk is as “safe” as BT and Virgin as a company?
Who is the better investment has nothing to do with debt totals, its what they do to decrease that and grow that would make the better investment.
Oh and no TT IMO are a horrid company on many matters, so do not think i am defending them in any shape.
On a personal and business level with regards to investing i would not invest in BT or TT. There are hundreds of companies where i can get a much larger and quicker return on an investment.
Disappointing you can not point me towards the figures to see who has the bigger debt and who has the better cash flow.
Ray they need to invest to grow and move forward. Just concentrating on debt is how companies shrivel up and die.
@ Ray Woodward
Well in order to have ROI you need to have ‘I’ first.
Clearly given the amount of ‘I’ going on a lot of commercial investors can see the ROI which is only a good thing for pure fibre network build out.
I wonder who will come next with these deals Gigaclear? Kcom? etc etc
KCOM already have the vast majority of there network able to take FTTP Now. It’s kind of the opposite of openreach they went for mostly FTTP and only a little FTTC. They are confident they will have 100% of there network over the USO by 2020 as well. Can’t see them expanding out of hull when they sold most of there network assets outside of hull. Gigaclear has a particular model that works very well for them and doubt they will ever change that and there is probably a bduk contract in Wales perhaps they could secure in future. In rural Devon and Somerset they will have quite a big presence.
Do we really think investors will touch them? They are in debt already.
Im shocked investors would consider touching any of the big players and their millions of debt. Interesting to see Cityfibre and Vodafone done a deal in the end rather than prior tooted BT and Cityfibre. I guess Cityfibre saw something they preferred from Vodafone.
BT were looking for a deal with Cityfibre? When was that?
Opps yep looked back and i do have my wires only slightly twisted on that, it was Vodafone and BT who were in talks about doing a deal.