TalkTalk upbeat despite downgrade
TalkTalk warned full-year earnings would be at the lower end of expectations as it absorbed Tesco’s loss-making blinkbox operation and said its programme of cost savings was on course to miss its target.
The group, which offers a “value-for-money” proposition for services such as broadband, TV, home telephone and mobile, made the warning as it published results for the third quarter to the end of December.
It is facing a shake-up in the market as major rivals such as BT and Sky prepare to add mobile offerings meaning they can also sell all four services but chief executive Dido Harding said she was “excited about the future of quad play”.
Revenues for the third quarter rose 4.2% to £449m while there was a rise of 15,000 in broadband customer numbers, with 115,000 TV adds, 50,000 more mobile and 88,000 for high-speed fibre services.
It will also add 75,000 broadband and 20,000 home phone customers to its network as part of the Tesco deal in the first quarter of 2015/16.
However, the group admitted its £5m purchase of TV and film streaming brand blinkbox last month would mean absorbing losses of £3-£5m for the current final quarter though it expects a positive contribution in the following financial year.
TalkTalk also said that cost savings as part of a programme to change the way it operates called “Making TalkTalk Simpler” (MTTS) would be £10-£15m lower than previously planned, partly due to a shift in focus to “integration activities”.
It said: “After including blinkbox losses and the lower cost savings from MTTS... full year EBITDA [underlying earnings] is expected to be towards the lower end of market expectations.”
The City had been expecting earnings between £238m and £278m.
Ms Harding said: “Today’s results demonstrate the strong and growing demand for our value-for-money products, as we saw our strongest ever quarter of TV, mobile and fibre adds.
“We are excited about the future of quad-play. TalkTalk is ideally positioned to push home its strategic advantage in an industry undergoing major changes.”
The results come as BT is in talks to buy mobile operator EE for £12.5bn while Sky moves into mobile through a deal with O2 and Three owner Hutchison Whampoa lines up a deal to buy the O2 network from Spain’s Telefonica for £10bn.
