TalkTalk shares fall on profit warning and fibre investment plans

09 February, 2018, 01:17 | Author: Regina Silva
  • Reuters

TalkTalk (TALK.L) asked investors on Thursday for 200 million pounds ($278 million) to help fund a plan to connect three million British homes and businesses with ultrafast broadband and keep it competitive with bigger rivals.

TalkTalk said it now expected full-year 2018 core earnings to come in between 230 million to 245 million pounds.

Commenting on the venture, Executive Chairman Charles Dunstone 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".

Infracapital will take an 80% slice of the new firm with a £400m investment while TalkTalk will own 20% after stumping up £100m.

The telecoms group has reduced its full-year earnings guidance and cut its dividend as it invests for the future.

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 United Kingdom households, it announced today. There will be a final dividend of 1.5p in FY 18, followed by an interim dividend of 1p and final dividend of 1.5p in FY 19. It expects to return to a normalised dividend of 7.50p when leverage is back below two times Ebitda. It paid 10.29 pence for its last financial year.

Similar to Vodafone's recent deal with CityFibre, TalkTalk and Infracapital said they planned to focus the new network on mid-sized towns and cities in the UK.

The company said the plan will build on a successful full fibre trial in York. The trial now reaches 14,000 homes - with plans to extend to a total of 54,000. TalkTalk will initially invest 100 million pounds into the project over five years.

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Barclays and Deutsche Bank are acting as joint global co-ordinators and joint bookrunners for the placing of new shares.

During the third quarter, TalkTalk saw double-digit growth in both the retail and wholesale customer bases.

The company added 37,000 customers in its third quarter, and forecast additions of 150,000 to 160,000 in the full year.

TalkTalk's sales for the quarter fell 1 per cent to £388m.

"We will continue to make significant cost reductions as we radically simplify the business in line with the strategy we set out a year ago", she added.

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".

"We anticipate revenue growth and strong earnings growth in the year ahead, as the benefits of a growing customer base and rigorous cost control begin to deliver the results this business is capable of".

The placing will be used to "strengthen the company's balance sheet, to support its continued customer growth and its investment in its long-term FTTP (fibre to the premises) plans", it said.

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