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TalkTalk Try to Raise £1bn for FTTH as SSE Mulls Sale of Retail ISP

Sunday, April 28th, 2019 (9:28 am) - Score 6,470
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The founder of Carphone Warehouse and sibling UK ISP TalkTalk, Sir Charles Dunstone, is reportedly trying to raise £400m in equity and £600m in debt to fund their as yet unrealised plans for a roll-out of Gigabit capable Fibre-to-the-Home (FTTH) broadband to 3 million premises. Separately SSE may sell off their retail ISP business.

At the end of last year TalkTalk shelved their original plan for a £1.5bn deal with Infracapital (due largely to a disagreement over how to value the network), which would have been used to fund their roll-out of a new “full fibre” network to millions of UK homes (here). Instead they unveiled a significantly smaller deployment plan to c.60,000 homes under the FibreNation project (c.100,000 if including their existing network in York).

Despite this the low cost internet provider has made no secret of the fact that they are still trying to find investment partners to support their original ambition, although so far they appear to have had little success in this endeavour and hence the new approach reportedly being considered by Dunstone. The Telegraph (paywall) claims that a formal process could begin in the next few weeks.

Clearly the ISP must be doing something wrong because meanwhile not a week seems to go by without a previously unheard of alternative network ISP cropping up and immediately attracting big multi-million pound investments. In such a market it may seem surprising, existing debt pile aside, that an establish player like TalkTalk can’t easily achieve the same feat.

However some would argue that they’ve historically tended to ask for more than is necessarily possible. As one senior industry source told ISPreview.co.uk recently, “The problem is TT wants to control so that TT benefits … no one will find a vehicle with TT [if they have] too much control.

On the other hand such obstacles are entirely solvable and we do think TalkTalk will overcome them, even though in this aggressively competitive market they might be better off partnering up with an established FTTH player than trying to go it alone.

Separately Sky News has discovered that energy and broadband provider SSE are looking to either merge or sell off their £1bn retail utility business. On the broadband side it’s understood that they’ve already held talks with TalkTalk, which as above is presently rather preoccupied with other matters.

Curiously Sky suggests that the discussions have centred on a proposed merger of the two companies, which seems highly unlikely to proceed. We suspect a sale of SSE’s consumer broadband base is more probable since they don’t have a network of their own to offer. In any case SSE has promised to update investors on the future ‎of their retail business when it reports full-year results on 22nd May 2019.

No doubt they’ll be talking with other ISPs too but there aren’t many who would be interested in a merger of this type. SSE was previously linked with a possible npower merger but that fell through.

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Mark Jackson
By Mark Jackson
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 Twitter, , Facebook and Linkedin.
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6 Responses
  1. Avatar Joe

    “Clearly the ISP must be doing something wrong because meanwhile not a week seems to go by without a previously unheard of alternative network ISP cropping up and immediately attracting big multi-million pound investments. In such a market it may seem surprising, existing debt pile aside, that an establish player like TalkTalk can’t easily achieve the same feat.”

    Plenty of their problems seem to be of their own making. But I wonder if ultimately they are not small enough to be nimble or large enough to have the sheer economies of scale to muscle in. Given their customer price point and underlying infrastructure, debt & EBITDA I can well see why getting investors is not so easy.

  2. Avatar CarlT

    As of close on Friday TalkTalk had a market capitalisation of £1.42 billion. Borrowing £600 million and diluting shares with £400 million of rights issues is going to be nasty.

    • Avatar Apriana

      Is it TT that’s taking on the balance though, or the new Fibrenation business which TT are a shareholder of. I’d say sensible given how badly previous “investments” in duct/fibre projects have gone

  3. Avatar Mike

    Wouldn’t mind TT FTTP if I can get it through a reseller.

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