Vodafone and Sky Sniffing Possible Acquisition of UK ISP TalkTalk
Mobile giant Vodafone UK and Sky (Comcast) are 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 more FTTP instead of Pay TV).
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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Oh please not! There isn’t many actually ISPs left they all just resellers.
TalkTalk have better infrastructure and better peering etc. Sky just funnel everything via London.
@Anon
TalkTalk Business world definitely be a key part of any big deal like this – that’s where the value of the TalkTalk company really sits.
Cannot see that the CMA would be happy for Sky to buy Talk Talk as it would reduce the level of competition and create 3 mega ISPs (BT, SkyTalk Talk and Virgin).
A Vodafone purchase would leave things roughly as they are with the big 4 (BT, Virgin, Sky, Vodafone/Talk Talk) so more likely to get approval.
From the CMAs perspective, today’s market is more complex and diverse than a restricted debate over customer numbers could attest. I suspect they wouldn’t object, given the vast number of ISPs and the level of competition in the wider market. But you never know with the CMA.
The argument with there are plenty of ISPs is that there all much smaller, much smaller than any of 4 big ones and given the large pockets of the big companies, 4 big is better than 3 mega.
And given the diverse marker place is really just a mirage as the investments companies backing the FTTP roll out will want their money sooner than later so there will be mergers happening within a few years.
Time will tell
So one poor customer support quality ISP less on the market? Great news!
You say that but Talktalk still leases to other ISPs (or at least Speedtest identifies my Cuckoo connection as Talktalk) and it’s still less competition which can have broader implications, especially if you don’t have the option of a non-Openreach network.
The only people I can see really celebrating are at other ISPs who aren’t reliant on TT in some way.
Most are as bad as each other to be honest, even
plusnet which used to have great customer service have gone downhill. Customer service is a thing of the past, no one cares.
I have dealt with all three above, Sky, Talk Talk and Vodafone and all three of them have customer service that stinks, worse than BT if that is possible
The thing is, when you switch to FTTP, you really don’t need customer service on the same level as ADSL or VDSL as it just works. If they started freeing up the ability to use your own router (which TalkTalk FTTP does) you probably will never need to phone them at all given you don’t phone them when you want to switch over to another provider these days too.
@Anthony Goodman, not everyone will be able to get FTTP and even if they can, they may not want it. we are getting FTTP up here in the next few months via an alt provider, I did think about it being a good idea, but recently I have been thinking do I really need it, and why would I want to pay more for a speed I will not really need? With the cost of living going the way it is, more people will say the same thing. Anyway, are you saying that FTTP never goes wrong?
I have been with plusnet VDSL for around 7 years, recently renewing the contract until june next year. I only had one problem network wise that I had to call Plusnet about, and they got Openreach to try and sort it out. We had a work around that worked in the end. the only other time I got in contact with them was this year when I renewed my contract, my next door neighbour changed from BT to Sky and somehow sky got my addresses mixed up with theirs and was going to change me over, so I had to contact Plusnet to stop the change over. It was a bit of a hassle, but to be honest, over the 7 years the network have been pretty reliable.
It is hearsay that I have heard about plusnet customer service going downhill.
But you don’t need to go for 500mb or 900mb. You can also get 40mb/s or 80mb/s FTTP. The difference you get is not just extra speed. It is also in reliability/stability – my speeds were all over the place and very sensitive to the slightest change with VDSL. Not so with FTTP. Also ping is insane compared to VDSL (I get 6ms ping with FTTP, I used to get a fluctuation between 30-50ms ping).
For most of the peeps on here I agree Anthony. However, fttp will only be (much) more reliable ‘to’ the house, and issues within the house will still remain. Even as an FWA ISP, we get more support issues that are to do with ‘in’ the house than we do with ‘to’ the house, I reckon.
@Anthony Goodman, you say you don’t have to go to 500Mb/s on FTTP, that is true, but some people only have access to alternative fibre providers, the company that is digging up the city where I live and sticking fibre here, has a minimum speed of 150Mb/s, the original price was £29 a month, they have just increased the price to £33 a month. , sure they will give you six months free, but they have increased the contract from 12 months to 24 months.
Maybe providers on open reach fibre network will offer 40 or 80Mb/s on it, but you have to have open reach fibre network in the first place.
Do Talk Talk 40Mb/s on FTTP? I don’t think they do. Also if you look at providers they still call FTTC fibre, so confusing people. Apart from the problem I had with the cabinet, my broadband have been pretty reliable.
Price wise I pay £23 a month for around 35Mb/s, it is more than enough for me, I did think about going for FTTP when zzoomm come up here, but then thinking about it more, I don’t see the point in paying extra for speed I don’t require and all the hassle of having FTTP installed.
So I can not see myself going to FTTP to be honest.
i think that tt should join up with vodaphone in order to bring more fttp to the homes in birmingham.
No please. I’m with TT and it works for me.
Even managed to renogotiate my package
There have often been rumours about TT being sold for many years, though the guy who broke the news on Twitter tends to be on the Money. He knew about some news when Dido was still running the show before anyone else, obvs has some links somewhere.
The interesting part would be the TTB side of things here, guessing that would not be part of any sale? There then is the Wholesale side too.
I’m a TT user and I find their Broadband service / speeds to be great, speaking with their support (like many ISP’s) can be a frustrating experience which is why I tend to use the community forum instead.
This is the thing I don’t get. Nearly everyone is on Copper VDSL. We are about to explode in FTTP take up in the next year or two. So Sky and Vodafone want to pay £3-Billion in buying a rival budget company hoping many of their customers would convert to FTTP with them? Why not just offer a good signing up deal and get people to convert to them on their own and save 3 billion?
You miss the key banking point.
For a £1.1bn transaction, the banks are getting £700m in debt interest. Arguably they may also be able to structure the debt to minimise the tax bill.
Either way, the banks approve the process of giving £700m to the banks.
I imagine that the backhaul network and the wholesale operations of TalkTalk (i.e. TTB) are the attractive features here.
Though any takeover would essentially necessitate the new owner to fold the TalkTalk network into their own – both Sky and Vodafone have significant backhaul networks of their own, so combining them with another might not be that easy?
Vodafone purchased some years back the uk arm of cable and wireless which had the 2nd largest uk fibre network at the time.
Sky bought the old easy net network many moons ago and have their own significant back haul infrastructure.
Most national high speed circuits today will be provisioned over open reach, Vodafone, SSE (or what ever they are called now).
TT, SKY etc will provision their connections over other providers backhaul.
I agree with Anthony, why would sky or Vodafone invest in TT when they could just put that potential £3bn into their own networks and compete for the TT customers?
If there is a bidding war I can see the CMA preferring a Vodafone buyout to create 4 strong retail providers, but it’s not straight forward, the cma stopped three buying O2 but where happy for O2 and VM to merge as that did not reduce the number of infrastructure providers but was a significant chunk of mobile customers in vm but less than on O2 overall.
Either way Vodafone remains a significant uk backhaul provider from their cable and wireless assets.
@Chris
TalkTalk and Sky have their own backhaul. TalkTalk’s backhaul network (TalkTalk Wholesale) is one of the biggest, certainly far bigger than Sky’s network.
‘TalkTalk’s backhaul network (TalkTalk Wholesale) is one of the biggest, certainly far bigger than Sky’s network.’
It’s also all leased. TT have no fibre in the ground of their own, they rent a bunch of links between exchanges and from large exchanges to datacentres.
FTTP and FTTC only need coverage of about a thousand exchanges. TalkTalk have ADSL equipment and backhaul from 2000 exchanges that add no value to a transaction. It will probably be making a loss month on month due to power, space and backhaul rental.
Sky will want the customer base, nothing else. Vodafone not sure as they spent tens of billions handing out special dividends and buying their own shares rather than investing but be temporary either way.
“It’s also all leased. TT have no fibre in the ground of their own, they rent a bunch of links between exchanges and from large exchanges to datacentres.”
Wrt performance makes no difference if backhaul is owned or leased by TT – they have 100% full control of it. Its similar to Hyperoptic leasing Openreach fibre for their FTTP backhaul in certain areas (eg London), yet they have total control.
Openreach dark fibre / DFX is only available between Openreach exchanges and one of them has to be an exchange where Openreach are the only provider. Hyperoptic do use PIA and their own fibre where they can but due to the areas they cover aren’t going to have much use for DFX so probably not a great example.
A reminder ‘backhaul’ is the part of the network between the access network and the provider’s core network.
I’m not sure exactly how the TalkTalk network is broken down but know it relies heavily on Openreach for colocation and can be pretty confident that much of it isn’t dark fibre, it’ll be an active service from whomever sells the cheapest circuit with dark fibre in the backbone.
Clues for this are things like that they collect together pretty large groups of exchanges and terminate them on BRAS that are colocated in BT exchanges. Sky terminate on equipment that’s in their own datacentres, which they have nationwide. They wouldn’t want or need to have loads of leased rack space in Openreach colocation facilities.
I’m a lot more familiar with Sky than Vodafone. I know Vodafone’s network is a bit of a disaster at the moment as they were too busy buying back shares to buy networking hardware but certainly for Sky the main attraction is the customer base. The network that matters is mostly a duplication of their own.
Let me put it another way – there are over a thousand NGA handover exchanges on the Openreach network. TalkTalk’s bandwidth record is 8.1 Tbps, and that might be summing downstream and upstream.
It really going to be worth trying to get dark fibre for all those exchanges so that they can, very occasionally, carry 8.1 Gbps each or rent a 10G Ethernet circuit and add another one in a port channel when necessary? They’ll be using Openreach, Neos, Virgin Media, etc, active products or at most leasing a wavelength to get those exchanges back to their core.
TalkTalk’s network isn’t likely to be bristling with leased dark fibre partly because it’d be a waste of money. They’re blessed by a very light usage customer base and the ability to buy 10, 40 and 100G active products.
Obviously if you’ve some insider knowledge I’m happy to stand corrected but I don’t see the business case for leasing dark fibre anywhere other than their core network. Might be the odd case where it was a bargain but other than that seems unnecessary.
Fibreway- TT in some cases use VMB Flexi filter offering between BT exchanges. Basically it’s a direct 10gb circuit between 2 locations, and can have multiple spare DWDM channels. How many depends on how much TT want to pay. OR offer something similar called something like OSA Filter connect. This is as close to dark fibre as you can get, without it being dark fibre. The main pro being the cost. The con being it doesn’t allow the company buying the circuit to build a full ROADM connected DWDM network, but does allow them transport what they wish between 2 sites.
vodafone should just aquire cityfibre
If you thought talktalk was bad before, If vodafone get their hands on it they will literally raise blood pressure on all their customers .
Sky have a good reputation for customer service so could be a blessing for talktalk
“TalkTalk’s consumer base is mostly made up of those on older copper and hybrid fibre lines”
That’s not really surprising, when you consider that:
1. Talktalk don’t have an entry-level (40/10 or 80/20) FTTP offering
2. Talktalk’s FTTP offerings don’t include any voice service
Hence even in FTTP areas, most of their customers won’t take it.
Vodafone and Sky already have both points sorted.
Talktalk will need to address point (2) in the next couple of years though, even for their copper users, because of PSTN switch-off.
Erm TalkTalk does have a 80/20 level FTTP!
They might be moving to a data only network going forward, not everyone want voice.
https://postimg.cc/nXkNn0Zh
You’re welcome.
1) Fibre 65
Latest offer for the entire minimum term of your contract (£23.50 per month for 24 month contract, £29.95 per month for 18 month contract, £29.95 per month for 12 month contract). The monthly price of Fibre 65 data only will rise in April each year by the rate of inflation plus 3.7%, from 2023.
2) TalkTalk don’t use WLR so its withdrawal won’t impact them. Might be the odd legacy customer still on it but they don’t use it routinely, they’ve been selling MPF for years so they take care of POTS.
Given the 82p (ex VAT) increase in cost from Openreach (post Equinox) and the backgaul usage being similar, I can see many providers dropping their 40/10 packages for 80/20 only. I believe Openreach drop prices if you only sell higher packages as well…
For VOIP:
@Fibreway copper shutdown will still affect them when their are no copper cables.
@Peter maybe they will though I think they’ll do a voip product at some point soon.
No date for copper to be closed down only for WLR to be removed. Stop-sell is a different thing from removing the copper entirely.
I’m sure they will provide a voice service if they need to. Their voice service is already digital once you reach the exchange.
Which ever one acquires talktalk can we please have ipv6.
maybe an update from Mark might be illuminating
https://www.ispreview.co.uk/index.php/2021/11/update-on-ipv6-plans-for-virgin-media-talktalk-plusnet-and-vodafone.html
I use TalkTalk.
Don’t really want to be forced on to Sky with their shitty service and “You must use our router. No ifs, no buts.”
What are you talking about, running a Draytek on sky fttc and have been for some time. Hardly a no ifs or buts deal. If it was as restrictive as you imagine then they would make it much harder, than how easy to implement, it is now. Don’t even need to get a password anymore.
Fibre 65 is costing me £26.50 even though I paid £23.50 18/24? month contract to start with early last year, not replied to my messages. If Vodaphone took over I would leave, not even Virgin(350) are any good where I live in Plymouth, they all freeze/ slow even at 5am!
The only reason Vodafone be interested in TalkTalk would be for their wholesale infrastructure which TalkTalk inherited with the takeover of Opal Telecom. TalkTalk Retail is the horrible part of TalkTalk with its terrible customer support and poor quality equipment, during the 6 months I had TalkTalk they paid me rather than me paying them, they gave me credit after credit because the service was so bad, by month 6 I got them to let me go without penalty and they paid me £106 into my bank account which the account was in credit by. The service never worked well, they never sent an engineer and the phone service kept going down as well.
During the 6 months I was with them, I refused to use their customer service centres and communicated through the CEO email and team. The customer service is next to useless!