Charles Dunstone, Chief Executive Officer, said: “Our performance over the last three months has been good in a slower consumer environment. In our Distribution business, continuing network competition and growing demand for mobile broadband have been key drivers. In Fixed Line, we have made further good progress on customer recruitment and continued migration to our own network, and we now have only 8,000 loss-making free broadband customers left to migrate.

Looking forward, we anticipate a year of considerable further progress. Although we are mindful of a tough consumer environment, we see significant opportunity to evolve our retail model to address the opportunities of a changing marketplace. The broadband business is set to deliver significant further margin improvement, and provides us with excellent earnings visibility."

In our Residential business we anticipate further broadband base growth of around 400,000 customers as we head towards our goal of 3.5m customers by March 2010. Net customer growth is likely to be skewed towards the second half, as over the next few months we will be completing the final elements of AOL’s integration. These involve migrating AOL Broadband customers off the AOL Inc network and billing platforms onto our own. Blended broadband ARPU will continue to rise, towards £24, as TalkTalk becomes an increasing part of the mix and we increase voice penetration of the AOL base.

With over 80% of new customers signed up in unbundled areas, and the opportunity to migrate additional AOL customers onto our fully unbundled network later in the year, we expect that by March 2009, 75-80% of the broadband base will be on-net.