UK ISP TalkTalk Considers Options After Management Shake-up

Andrew G says:

Do we have proof of the “growing pile of debt”? Most recent accounts appear to be only up to Feb 21, but didn’t show any major year on year change in debt. I’d reckon that the problem is that Talktalk is a retail business with few real assets – a recognised but not respected brand, not much in the way of tangible fixed assets, and customer contracts that are at most 18 months long. And those customers are price conscious, low margin with limited upsell potential. Toscafund evidently hoped to flip TT by buying cheap, repainting the walls, changing the window frames and selling out to VM for near on twice what they paid. VM (who despite being no rocket scientists) still managed to spot that they were being asked £3bn for a customer base of low and systematically declining ARPU customers who are reasonably well engaged with switching, and where the business was making a puny 6.4% ROCE estimated from the 11 month 2021 figures. Admittedly there would be savings on corporate overheads, plus savings on marketing if they brought it all under the VM brand, but with the deal premium they’d be looking at ROCE below the incremental cost of the debt VM would need to buy TT.

TT’s problem is that they are the Poundland of ISPs, their proposition is simply mass marketing with price over quality offers (worst provider in Which’s annual assessment). Where do they go from there? If TT’s management think a bit more M&A is going to change things they’re wildly mistaken; M&A is always a welcome executive distraction from the hard, dull grind of running a successful business unfortunately it consistently destroys shareholder value. At end 2021, TT’s average PBT per customer was about ten quid – no obvious danger of going bust, equally remarkably unattractive. Obvious that they need to roughly double that, and within that average, some customers will be making a net loss, many others contributing nothing.

Identifying a problem is different to solving it. So what would I do? Look to change the userous baked in contract price rises in a way that gave me a clear marketing edge; Look to migrate customers onto FTTP as fast as possible, try and find options to offer higher speeds at the same price; identify the serial switchers and allow (even encourage) any non-profit making customers to leave; Proper root cause analysis of TT’s poor reputation for service and support to identify what can be improved without changing the cost of support or the service delivery model. There you have it TalkTalk – four tangible, conceptually simple actions to improve business performance. Of course, M&A and deal making are simply the easiest way of avoiding doing those things.

Colin Presland says:

I’ve been with Talk Talk many many years now decided to leave and move over to a different provider. Many of the ISPs are moving Call Centre back to the UK and seem to be providing better customer service experience then Talk Talk. I am quite techie and I do not like Call Centre staff who ignore what I have said and still read off the script. I’ve been experiencing a problem with my Internet now since last summer, given up trying to get through to their customer service Staff on what is happening. They don’t seem to understand that I have an open reach modem, for G.fast, they still think I have just have the Talk Talk router, the router is absolutely fine, the problem I believe is the open reach modem, which occasionally lose connection and I have to reboot it. My new provider, which I will be moving over to next week has identified there is a problem and is sending out a engineer.

I’m sure people would stay with Talk Talk if a customer services experience was better.

Maybe Talk Talk needs to look into having a 2 level accounts, one budget, one premium, for people who would like to pay a bit more for decent customer service.