TalkTalk plugs into digital race

TALKTALK has joined the race to bring the UK up to digital speed with plans for ultrafast broadband in more than three million homes and businesses.

The telecoms group is forming an independent company with Infracapital, the infrastructure arm of M&G Prudential. Their combined equity investment of up to £500million with a further £1billion of borrowing will fund a roll-out in midsized towns and cities. TalkTalk’s contribution is 20 per cent.

The move by TalkTalk, which has raised £200million to support the venture and boost its balance sheet, increases competition for BT’s Openreach, which last week stepped up its full-fibre connections target to three million homes and firms by the end of 2020. Vodafone is working with CityFibre to connect up to five million homes and businesses by 2025.

Executive chairman Sir Charles Dunstone, pictured, said: “By signing heads of terms with Infracapital we are making good progress towards putting TalkTalk at the heart of Britain’s fibre future.”

Culture Secretary Matt Hancock welcomed TalkTalk’s commitment, which would help to make the UK “fit for the future”. Regulator Ofcom said there is “real momentum” behind full-fibre broadband but called for further commitments from industry “to build the networks that will support our future economy”.

However, TalkTalk shares fell 11¾p to 108p after it cut its dividend and reduced its annual profit forecast by about £35million to between £230-245million.

Its customer numbers increased by 37,000 in the third quarter compared with 26,000 over the previous three months, while the rate of churn – the percentage of customers leaving – fell from 1.6 per cent to 1.3 per cent.

Accendo Markets research analyst Henry Croft described TalkTalk’s full-fibre move as “a major rolling of the dice to turn around the fortunes of a company dogged by profits warnings and underperformance versus larger peers”.

He added: “A decisive turn to fibre shows TalkTalk is willing to test new waters to reinvigorate its business.

“However, much depends on the success of this venture, as a failure to properly capitalise on demand for faster internet speeds in the smart appliance age could spell the beginning of the end for a company once seen at the forefront of UK digital innovation. And that was just 15 years ago.”