Government intervenes as BT inks deal to rescue embattled Talktalk
Broadband giant BT has agreed to snap up embattled telecommunications firm Talktalk in a move that has prompted the government to weigh in.
The FTSE 100 group said on Monday it had acquired Talktalk and its wholesale arm PlatformX Communications (PXC) out of administration on a debt-free basis.
The deal, for an undisclosed sum, is estimated to take a £400m bite out of BT’s bottom line, from transaction fees, working capital, a £60m trading loss, and £100m in uncollected Openreach revenues.
It will provide “immediate reassurance” for Talktalk employees and its 1.5m retail customers and 1m wholesale users across the UK, BT said.
Culture secretary Lisa Nandy said: “Phone and broadband services are vital national infrastructure. If TalkTalk services fail, there is a genuine risk to life and public services – including to hospitals, schools and emergency care.
“These are unprecedented circumstances that require action now. That is why I am acting with urgency to ensure that impacts on public health, critical national infrastructure and supply to vulnerable customers are fully considered as part of this process.”
The government said it was acting under Enterprise Act powers that will permit Nandy to consider the wider public interest once the Competition and Markets Authority (CMA) has reported on competition concerns. The CMA has been directed to report back by 19 October.
Ares Management, the US private credit giant which has lent Talktalk millions of pounds, has warned officials that at BT deal would undermine the UK’s pro-business credentials and damage Britain’s standing as a destination for international investment.
‘Genuinely unprecedented’
Talktalk, which is the UK’s fourth-largest broadband company, was founded in 2003 by Charles Dunstone as part of the Carphone Warehouse group. It has suffered under a highly competitive telecoms market and saw its customer numbers shrink from highs of 4m in 2019.
The group has debts reported to be around £1.4bn and has required repeated injections of additonal funding. This March, Talktalk announced £115m of new facilities from its existing shareholders and lenders, which was made up of £65m of term funding and a £50m working-capital facility.
In the last 12 months, TalkTalk made around £1.2bn in revenue and was loss-making. It is estimated to employ around 900 people.
Allison Kirkby, chief executive of BT, said: “This is a genuinely unprecedented situation, where millions of citizens and businesses were at risk if Talktalk had collapsed. BT is the digital backbone of the country, with a presence in every postcode.
“We have been connecting the nation for generations, stepping up in the moments that matter, and BT acquiring Talktalk is now the only viable option to keep millions of customers connected and supported.”
Kirby added the “immediate priority” was to stabilise the business and provide a “safety net” for those who rely on Talktalk.