TalkTalk cuts dividend to fund UK full-fibre roll-out

Thursday 8 February 2018 | 10:43 CET | News

TalkTalk confirmed that it was in talks to provide a full-fibre roll-out across the UK, potentially providing full fibre to more than 3 million homes and businesses in medium-sized towns and cities. The announcement was made as TalkTalk issued a trading update for its third quarter to 31 December, with on-network net additions reaching 37,000 in the quarter. The company has increased its net addition forecast for the full year to 150,00-160,000. 

TalkTalk is in talks with Infracapital, the infrastructure equity investment arm of M&G Prudential, to set up a new company for the fibre plan. Infracapital would provide 80 percent of the funding and TalkTalk 20 percent, with potential equity investment of up to GBP 500 million, enabling total investment of around GBP 1.5 billion. TalkTalk would be a founding wholesale customer of the new company, providing a minimum volume commitment. The plans build on TalkTalk's successful full fibre network trial in York, which already reaches 14,000 homes and is being expanded to reach 54,000.

TalkTalk has also announced a proposed equity placing to raise up to GBP 200 million, with the Executive Chairman and other Directors planning to participate in the placing and intending to contribute up to GBP 40 million. The net proceeds will be used to boost the group's balance sheet, investment in long-term FTTP plans and support continued customer growth. 

During the third quarter, TalkTalk saw double-digit growth in both the retail and wholesale customer bases. In Consumer, the total number of customers on fixed low price plans (FLPP) reached a total of 1.8 million in Q3, representing 61 percent of the retail base. Fibre net additions reached 89,000 in Q3, compared to 89,000 in Q2 and 74,000 in the year-earlier quarter, with over 40 percent of new customers taking fibre. Improvements in churn were driven by the growth of the in-contract base, with on-net churn falling to 1.3 percent, from 1.4 percent in Q2 and 1.6 percent a year earlier. 

Headline group revenue increased 1 percent year-on-year in Q3 to reach GBP 388 million, excluding Carrier revenue of GBP 20 million and off-net revenue of GBP 6 million. On-net revenues were flat year-on-year at GBP 316 million. Corporate revenues (excluding Carrier) increased 5.9 percent in Q3 to GBP 72 million, driven by 7.7 percent growth in Data revenues to GBP 42 million. The TalkTalk Business Ethernet and EFM base grew by 1,800 lines in the quarter to reach a total installed base of 48,000 data connections. 

TalkTalk has also revised its full-year FY 2018 EBITDA guidance to GBP 230-245 million, and is forecasting EBITDA growth of 15 percent in FY 2019. It has also decided to temporarily reduce the dividend to 2.5 pence per annum to fund continued investment in growth and its share of the full-fibre investment. There will be a final dividend of 1.5p in FY 18, followed by an interim dividend of 1p and final dividend of 1.5p in FY 19. TalkTalk will publish preliminary results for fiscal year 2018 on 11 May. 

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