TalkTalk says it's yet to close deal on FibreNation as UK telecoms industry reels over Labour's nationalisation plans

'The news overnight ... making everybody in the sector pause and consider'


TalkTalk has yet to find a buyer for its infrastructure investment vehicle Fibre Nation, the business revealed in its results for the half year to 30 September.

The budget ISP had delayed the publication of its financials earlier this week, alluding to a pending sale of Fibre Nation as the possible reason. Fibre Nation was created last year, with the ambition of connecting three million homes to full-fibre via a £1.5bn investment it is yet to raise.

Today TalkTalk reiterated it was still in “ongoing advanced negotiations with interested parties regarding its FibreNation business.” It reported underlying earnings before interest, tax, depreciation and amortisation up 14 per cent £140m, on revenue down 3.6 per cent to £792m.

It said the fall was largely due to lower voice usage and call revenue across consumer and business. Meawhile “HQ move efficiencies” boosted EBITDA by “driving a materially lower cost base.”

The business now has two million customers taking a fibre product, having added nearly 300,000 customers in the half. Headline revenue decrease was offset in part by increased fibre penetration, it said.

Tristia Harrison, chief executive of TalkTalk, said: “Fibre broadband is good news for customers and TalkTalk. It offers a faster, more reliable service whilst also reducing churn and comes with a materially lower cost to serve. In addition, our soon to be completed HQ move and shift to a self-service model is underpinning our cost reductions.”

She told Reuters this morning that while the FibreNation sale "discussions" were very advanced, "the news overnight of course is making everybody in the sector pause and consider."

She added: "We were really close, really close, but I think something of this sort that is in the news, obviously everybody is... digesting and working out what it means."

Philip Carse, analyst at Megabuyte, said the lack of an update on FibreNation was note-worthy given the Labour Party's pledge today to part-nationalise BT.

He said: "Whether this is down to the Labour announcement or not, Labour's policy would decimate the business plans of TalkTalk and the hundreds of resellers that provide broadband and connectivity services to consumers and business, who one assumes would lose their current margin on connectivity, even if they could still charge for voice and other services.

He said it also calls into question what would happen to the network assets of other infrastructure-deep companies such as Virgin Media and the host of new build FTTP networks from the likes of KCOM and Gigaclear, while BT shareholders "will wonder what if any compensation they would receive for Openreach."

He added: "We can imagine a few headaches among telecom CEOs and shareholders this morning."

Andrew Ferguson, of ThinkBroadband, said it was 50-50 on whether Labour's pledge may have spooked a potential buyer for FibreNation.

"If it was me looking at buying I would have asked for a pause until I know whether it was worth proceeding or take my money elsewhere. I might have to go elsewhere too since [there will be] free broadband with no adverts for broadband or services to sell.

"[But] the TalkTalk FibreNation deals have always seemed on a knife edge unlike others who've got large pots of VC money put into them." ®

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