TalkTalk plans to bring full fibre speeds of 1Gbps to three million premises in the UK, by creating an independent company with a total investment of around £1.5bn.
Under the plans, the entity would be 20 per cent owned by TalkTalk and 80 per cent by infrastructure investor Infracapital. The ISP is also raising £200m in new equity.
Operators have been ramping up plans for full fibre over the last few months – something Blighty is currently ranked third worst country in Europe for. Last week BT's Openreach announced plans to connect three million premises to full fibre by 2020, up 50 per cent on its previous goal. Its ambition is to connect 10 million homes by 2025.
Meanwhile, Vodafone inked a deal with CityFibre in November to connect up to five million premises over the next eight years.
Matt Hancock, culture secretary, welcomed the latest announcement. He said: "This investment will make significant strides in giving Britain the connectivity we need to be fit for the future."
Jonathan Oxley, competition director at Ofcom, echoed the sentiments: “We welcome this latest announcement, which is another example of the real momentum behind full-fibre broadband."
Charles Dunstone, exec chair of TalkTalk, announced the plans in the company's earnings update. He said: "It's 12 months since I announced my intention to take a more active role in the management of TalkTalk. Since then, we have reset the business and returned it to quarter-on-quarter customer growth.
"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."
He said the company needs to strengthen its balance sheet ahead of the venture, and has "temporarily reduced our dividend to take full advantage of the opportunities available". Shares fell 12 per cent on the back of the announcement.
TalkTalk is in the process of ditching its mobile offering to concentrate on its core broadband service, and has already begun notifying customers.
TalkTalk's sales for the quarter fell 1 per cent to £388m. It estimate earnings before interest, taxation, depreciation and amortisation to be between £230m and £245m compared, down from previous guidance of between £270m and £300m.
TalkTalk has previously trialled full fibre in York, along with Sky and CityFibre. The trial currently reaches 14,000 homes – with plans to extend to a total of 54,000. ®