Telecoms firm TalkTalk is in talks with investment giant M&G Prudential over a £500m investment in rolling out fibre broadband to over three million UK households, it announced today.
Shares in the FTSE 250 firm fell 14 per cent as markets opened.
The firm also reduced its dividend for the second time in a year, to fund its share of the investment, at the same time as announcing a £200m equity placing.
The two firms have agreed heads of terms with Infracapital, the investor's infrastructure arm, on a joint venture which would be 80 per cent owned by Infracapital and 20 per cent by Talktalk.
TalkTalk would be the founding wholesale customer, providing the joint venture with a minimum volume commitment.
The investment would target "mid-sized towns and cities in the UK", after trialling 14,000 homes in York, the firm said in its third-quarter trading update.
Culture secretary Matt Hancock said he strongly welcomes the "commitment" by TalkTalk.
He said: "This investment will make significant strides in giving Britain the connectivity we need to be fit for the future. It's fantastic to see TalkTalk stepping up to the plate – we want a healthy, vibrant, competitive next-generation broadband market and are working hard to deliver the investment and good jobs that comes with it."
TalkTalk has endured a difficult few years, with a long legacy from a 2014 hack of customer data and the departure a year ago of former chief executive Dido Harding.
Charles Dunstone, the executive chairman who took on a more active role in the firm after Harding left, said TalkTalk has "reset the business and returned it to quarter-on-quarter customer growth".
He said: "By signing heads of terms with Infracapital we are making good progress towards putting TalkTalk at the heart of Britain's fibre future by building a full fibre network, bringing faster, more reliable internet to millions of homes and businesses."
The firm intends to raise £200m in an equity placing. Dunstone and other directors buy up to £40m of the shares.
The firm added 37,000 customers in the third quarter, and raised its forecasts to between 150,000 and 160,000 for the year to March. Revenues grew by one per cent during the quarter.
Earnings for the full year are estimated to be £230m to £245m because of its spending on acquiring customers, although it added that it expects earnings to grow by 15 per cent in the 2019 financial year.