{"id":25222,"date":"2020-12-17T08:16:43","date_gmt":"2020-12-17T08:16:43","guid":{"rendered":"https:\/\/www.ispreview.co.uk\/?p=25222"},"modified":"2020-12-17T08:46:58","modified_gmt":"2020-12-17T08:46:58","slug":"broadband-isp-talktalk-uk-sold-to-toscafund-in-1-1bn-deal","status":"publish","type":"post","link":"https:\/\/www.ispreview.co.uk\/index.php\/2020\/12\/broadband-isp-talktalk-uk-sold-to-toscafund-in-1-1bn-deal.html","title":{"rendered":"Broadband ISP TalkTalk UK SOLD to Toscafund in \u00a31.1bn Deal UPDATE"},"content":{"rendered":"

After an extended period of negotiation TalkTalk<\/a>, the budget broadband and phone provider that is currently home to around 4.2 million UK customers, has today officially recommend a \u00a31.1bn takeover proposal from Toscafund, which including debt values the company at around \u00a31.8bn.<\/p>\n

Prior to today Toscafund<\/strong>, which is controlled by hedge fund tycoon Martin Hughes (allegedly nicknamed “the Rottweiler<\/em>“), was already one of the provider’s largest shareholders and controlled around 30% of the ISP – roughly the same stake as TalkTalk<\/a>’s Founder and Executive Chairman, Sir Charles Dunstone<\/strong>, holds.<\/p>\n

The ISP reportedly rejected an earlier \u00a31.5bn (135p a share) bid from Toscafund last year (here<\/a>), but that was before COVID-19<\/strong> hit and at the time they still owned a “full fibre<\/em>” network of their own (FibreNation), which has since been sold to Cityfibre<\/a> for \u00a3206m. Nevertheless, the fund went on to table a second, more formal, takeover proposal in October 2020 (here<\/a>) worth \u00a31.1bn (97p a share) and they’ve been talking ever since.<\/p>\n

The October announcement caused shares in TalkTalk<\/a> to jump from 82.90p and, at the time of writing, they’re now worth 96.25p (roughly akin to the 97p of the new offer). The recommended deal is unlikely to be rejected as it has secured backing from the majority of key stakeholders. Otherwise, the cash consideration payable by Toscafund, pursuant to the Acquisition, will be financed by up to \u00a3527 million of debt.<\/p>\n

Ian West, TalkTalk’s Senior Non-Executive Director, said:<\/strong><\/p>\n

“Having considered in detail the best interests of all shareholders and TalkTalk as a whole, the Independent TalkTalk Directors believe that the cash offer from Toscafund provides an opportunity for shareholders to recognise immediate value for their shares at a premium of approximately 26% to volume-weighted average price for the three month period ended 7 October 2020.<\/p>\n

The Independent TalkTalk Directors have also taken into account the risks associated in achieving TalkTalk’s strategic ambitions and the wide support that Toscafund would provide in this regard. The Independent TalkTalk Directors believe, taking into account the advice they have received, that the terms of the cash offer are fair and reasonable and are unanimously recommending that shareholders accept the cash offer.”<\/p><\/blockquote>\n

Sir Charles Dunstone, TalkTalk’s Chairman, said:<\/strong><\/p>\n

“I am pleased to have the opportunity to continue to be a major shareholder in TalkTalk. My decision underlines my passion for the company and the confidence the senior management team and I have about our journey ahead. That said, as the UK transitions to full fibre we have a hugely challenging, but exciting opportunity.<\/p>\n

Being a private company would allow us to accelerate adoption and focus on our role as the affordable provider of fibre for businesses and consumers nationwide. The Telecoms industry is going through a fundamental re-set and we are keen to play our part in it.”<\/p><\/blockquote>\n

The big question now is what will Toscafund do with their new acquisition once approved, aside from taking the company private “as soon as practicable following de-listing<\/em>“. TalkTalk’s most strategic value is in their customer base (business and residential), but whether or not that alone is worth the asking price is another matter.<\/p>\n

Outside of that the ISP remains beholden to key suppliers for their future (currently Openreach<\/a> and Cityfibre<\/a>), while the inevitable migration toward FTTP<\/a> will see their prior investment in unbundled (LLU) copper lines being diminished, which could also leave them with less room to maintain a competitive edge on future broadband products.<\/p>\n

On the other hand, today’s market remains aggressively competitive and COVID-19 has helped to highlight the importance of broadband connectivity, which is clearly something that Toscafund will be thinking about.<\/p>\n

Half Year Results<\/strong><\/span><\/h3>\n

On top of all this TalkTalk has just published their latest half year results to 30th September 2020, which saw them add 187,000 new “fibre<\/em>” (FTTC<\/a>\/P) broadband customers over the last 6 months (or 120,000 in the last quarter alone [Q2 FY21 financial] vs 67,000 added in Q1 FY21). Meanwhile their business division added another 2,100 Ethernet lines in the last half (unchanged from H1 FY20).<\/p>\n

Furthermore, 85% of new consumer customers in the last quarter took a fibre product (vs Q2 FY20: 79%), and to cap that off they now have 31% of their consumer base on the higher ARPU 80Mbps (FTTC<\/a>) product (H1 FY20: 24%). We also get a useful progress update on their wholesale agreement with Cityfibre<\/a> for FTTP<\/a> broadband.<\/p>\n

TalkTalk Statement on Cityfibre \/ FibreNation<\/strong><\/p>\n

Having sold our Fibre Assets Business (FibreNation Ltd and Bolt Pro Tem Ltd) to CityFibre Holdings for \u00a3206m in March 2020, we have continued to connect customers in the FibreNation footprint (York and surrounding areas) throughout the period and have now started to connect our first customers in Milton Keynes on the wider CityFibre footprint. <\/p>\n

As part of our long-term, competitive wholesale agreement with CityFibre we are also now connecting customers on a trial basis to CityFibre products in Aberdeen, Bolton and Peterborough. We will imminently be connecting to a further 12 cities including Newcastle and Worthing and will commence selling at scale in the new year. <\/p>\n

We are now also at scale across the Openreach<\/a> footprint for both new and existing customers across both Consumer and B2B. As at today, TalkTalk’s national Full Fibre footprint provides us with access to approximately 3 million marketable homes and businesses, and we expect to increase this coverage to in excess of 4 million premises by the end of the financial year.<\/p><\/blockquote>\n

Finally, TalkTalk’s CEO, Tristia Harrison, said the operator had seen “excellent network performance<\/em>” despite a 40%+ increase in data usage. Sadly, the results don’t seem to give a clear customer total, but the provider’s headline revenue (excluding Carrier and Off-net) for the half year period has fallen to \u00a3717m (vs \u00a3764m for the same period last year).<\/p>\n

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