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ISP TalkTalk Delays Results Pending FibreNation UK FTTP Deal

Wednesday, Nov 13th, 2019 (7:38 am) - Score 2,832

Budget broadband ISP TalkTalk intended to publish their latest financial results today but this has just been delayed as a result of “advanced negotiations with interested parties” over the future of their sibling FibreNation business, which has been trying to drum up £1.5bn of investment to support their UK “full fibre” roll-out.

At present the provider’s FibreNation (wholesale company) sibling has a long-term aspiration to cover 3 million UK premises with a 1Gbps Fibre-to-the-Home (FTTH) broadband network. Excluding their existing rollout to 54,000 premises in York, FibreNation recently started its rollout to 61,000 premises in Dewsbury (here) and on top of that they aim to cover 100,000 premises across Harrogate, Knaresborough and Ripon in the future.

NOTE: FibreNation is initially focused upon the Yorkshire region, where they’re investing £100m of their own money.

The challenge for TalkTalk has been in trying to gather enough investment to support their plans, which has so far attracted some interest from several possible investors (here) and one potential buyer in the shape of former York deployment partner Cityfibre (here).

One possible problem above is that the ISP originally had a backer for it’s £1.5bn FibreNation plan – Infracapital – but they allegedly pulled out due to a disagreement over the value of the new network. As such it was considered a possibility that other investors could potentially run into a similar obstacle when they reached the same stage of negotiations.

Nevertheless TalkTalk wouldn’t be delaying their results unless a major announcement was imminent. The plan now is to publish their interim results by the end of this week instead of today, so we should find out before the end of play on Friday.

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 X (Twitter), Mastodon, Facebook, BlueSky, Threads.net and Linkedin.

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Mobile giant Vodafone UK and Sky (Comcast) have reportedly two among several "groups" that have approached budget conscious fixed broadband ISP TalkTalk about a potential deal (most likely an acquisition), which in theory could create a much larger provider with more influence over the industry. Just to recap. In 2020 TalkTalk became the subject of a £1.1bn takeover by Toscafund - controlled by hedge fund tycoon Martin Hughes (here), which including debt valued the broadband provider at around £1.8bn. The deal took the ISP private and gave them more financial flexibility for their future plans. Since then, they've backed Freedom Fibre (here) and this week made the notable acquisition of Ethernet provider Virtual1 (here). According to the FT (paywall) and Sky News, TalkTalk is now said to have asked investment bank Lazard to review its options after allegedly being approach by several groups, including Vodafone and Sky (Sky Broadband). Lazard is a logical choice as they recently acted as Financial Advisor to TalkTalk on the Virtual1 transaction. Some industry analysts have reportedly suggested that TalkTalk itself could now be worth "at least" £3bn. But this seems rather optimistic for an ISP that doesn't have any significant fixed line broadband infrastructure to call its own (excluding their old unbundled LLU network) and largely just piggybacks off Openreach (BT), CityFibre and Freedom Fibre. But TalkTalk do have a strong business and wholesale side. Funnily enough, Sky Broadband are in a similar position with their own fixed line base, while Vodafone also likes to piggyback off Openreach and CityFibre. At present, Vodafone has a fixed broadband base of 991,000 customers, while Sky Broadband is estimated to be home to around 6.7 million and TalkTalk has approximately 4.2 million. Suffice to say, anybody gobbling up TalkTalk would instantly become a much larger provider, giving them a greater say in how the UK broadband market develops and more opportunities for convergence (Vodafone with mobile, and Sky with mobile and TV). Crucially, TalkTalk's consumer base is mostly made up of those on older copper and hybrid fibre lines (i.e. ADSL and FTTC / VDSL2), which are ripe for a future migration to FTTP. At the time of writing, all of the aforementioned operators have decline to comment on the reports, and TalkTalk has yet to receive any serious formal offers. In other words, we strongly suspect that this is largely just an exercise in spin to help TalkTalk drum up some more productive interest in the idea. But at the same time, it's not unreasonable to suspect that they might succeed, as the interest seems genuine. On the other hand, we see reports like this every year or so and only a very few ever convert into a serious offer. Time will tell. Much may depend upon whether or not TalkTalk’s new owners are more flexible and pragmatic about doing a deal than the previous lot. Arguably, TalkTalk might have gone much further by now had they taken some different decisions a few years ago (e.g. co-investing in FTTP instead of Pay TV).

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Comments

1 Response

A_Builder says:

November 13, 2019 at 5:53 pm

Lets hope this turns from FTTpr (Fibre To The Press Release) into FTTP as this is getting pretty boring to watch.

There has got to be a reason why, in market sloshing with cash to invest in FTTP, FN cannot raise the required capital.

And that is almost certainly overvaluation of what TT bring to the party.

As always the old aphorism rings true “better to have a smaller slice of something very valuable than a larger slice of nothing.”