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Muted TalkTalk Update as ISP Continues FibreNation Investor Hunt

Wednesday, July 17th, 2019 (7:52 am) - Score 5,653
talktalk office manchester

Budget UK ISP TalkTalk has this morning issued a thin trading update to the end of June 2019 (Q1 FY20), which sees them claim to be making “good progress on finding an infrastructure investment partner” for their FibreNation (FTTH broadband rollout) project but without actually announcing one.. again.

At the last results release in May 2019 (here) we noted that the provider’s growth had slowed and as a result they’d only added +2,000 on-net customers to total 4.289 million. Since the second quarter of the year tends to be one of the slowest, due to seasonal movements of students, then it’s possible they may have seen an overall decline in the latest quarter (i.e. companies that lose customers prefer not to show it).

Despite this there were some positive highlights today. Strong demand has continued for their “Fibre” based broadband services (i.e. mostly FTTC with a little FTTH from York) with +118,000 net adds in the quarter (Q1 FY19: 67k). Some 70% of new consumer customers took “Fibre” services in the quarter (compared with 44% at the same time last year) and this peaked at 75% in June 2019 alone.

As a result of the above, TalkTalk noted that over 50% of their consumer customers now take a Fibre-based product and encouragingly 39% of related net adds in Q1 took the faster 80Mbps FTTC product (up from 31% in Q4 FY19), which delivers a higher average revenue per user (ARPU). “[Fibre] customers have significantly higher customer lifetime value – with higher ARPU and materially lower churn and cost to serve,” said the ISP.

Meanwhile total headline revenue (ex-carrier and off-net) was up 1.3% to £387m (Q1 FY19: £382m) and headline on-net revenue grew 2.6% to £317m (Q1 FY19: £309m).

Tristia Harrison, CEO of TalkTalk, said:

“Q1 is in line with our plan. Revenue and Consumer ARPU rose year on year, underpinned by very strong demand for faster, more reliable Fibre products. Up to 75% of new Consumer customers are now taking Fibre and we’re seeing more customers than ever choose the faster of our Fibre products.

In addition, our ongoing simplification and cost reductions continue to drive improvement in profitability, and we remain on track to deliver EBITDA in line with expectations for the year.”

Sadly it looks like the wait for an investment solution to their FibreNation proposal continues (needed after Infracapital lost interest), which aspires to reach 3 million UK premises with 1Gbps full fibre (FTTH) broadband but has so far only targeted c.100,000 (this includes their long-running rollout in York).

The ISP had previously said that they expected to begin the build of their new full fibre network in Harrogate, Knaresborough and Ripon during this summer but there’s no word on that in today’s announcement. Despite TalkTalk’s struggle for new investment (here and here) we note that smaller alternative network ISPs seem to have no trouble hoovering up cash front, left, right and centre.

UPDATE 9:26am

We’ve had a comment from a market analyst at Cityindex.co.uk.

Fiona Cincotta, Senior Market Analyst at Cityindex.co.uk, said:

“TalkTalk is now into the third year of its turnaround plan, but question marks remain over whether its focus on gaining market share will ultimately boost its profits.

The company is continuing to win broadband customers, with 118k net adds recorded over the first quarter, though that was slightly behind market expectations of around 130k.

TalkTalk is continuing to add customers as more and more households order faster broadband to facilitate their Netflix and Amazon binges. The problem is that competition in the telecom sector is rife and TalkTalk is having to offer relatively low prices to win market share.

TalkTalk’s average revenue per user during the first quarter slightly beat market expectations but it is still lower than it was last year, keeping the pressure on management to trim operating costs.”

Leave a Comment
9 Responses
  1. Avatar Tim

    Harrogate and Knaresborough Have Virgin Media so I can’t see there being much take up (people that want fast speeds will already be in contract with VM).

    • Avatar Badem

      Difference is the price margin, UFO in York is 1Gig for about £30 a month maybe? Virgin Media is how fast and how much?

      Also unlike Virgon Media, FibreNation could wholesale their UFO to others ISPs so competition opens up.

      Remember Fibre Nation is the infrastructure builder not an ISP (like City Fibre)

  2. Avatar CarlT

    If they’re struggling this badly to find an investor when, as Mark suggested, a number of others aren’t having a problem it makes me very interested to see the business case they are putting forward.

    • Avatar A_Builder


      I suspect the issue is that TT want a big slice of the JV for no cash and not much else.

      If you want investment you need skin in the game.

  3. Avatar New_Londoner

    It’s not clear to me why an investor would put money into TalkTalk’s fibre nation project in order for a third party to be contracted to build it. If TT is providing neither the money nor the engineering resources, what exactly is its value-add?

    Separately, the CEO says ARPU has gone up vs last year, the analyst says it is lower, they both can’t be right?

  4. Avatar Matt

    Im with TalkTalk for Fibre Broadband up to 76mbps package the price is excellent & also includes the line rental charge from greedy BT who own all the lines. I would like to take the next step & get even faster fibre deal however as this story states no real investment & blaming competition from other providers (Which i think is a poor excuse) possibly made harder by Red Tape also i presume from local councils & government. Basically just get on with it or we will be left behind!

  5. Avatar Matt

    Probably has a lot to do with their piss-poor service. Constant drops, low speeds and truly dire customer service.

  6. Avatar Dot

    I have tried to telephone and email Talktalk several times over the last 5 months
    They have not the decency to reply.
    The service is disgusting with 7mgb and has my contract is up shortly it will not be renewed with them

    • Avatar Badem

      You may find that moving to another ISP yields the same speeds, this is because the connection between your property and the exchange where the ISPs equipment is housed does not change when you change provider.
      All that changes is the connection in the exchange (on Copper) or the Cabinet (for FTTC)

      If TalkTalk are not reply are you sure you are speaking to the right people? Under the speed obligation if your speed does not meet the minimum guaranteed then you are eligible to leave for another provider. These speeds are obtained from Openreach themselves.

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