BT has bought TalkTalk's consumer and wholesale operations out of administration, a rescue the company says was needed to keep service running for about 2.5 million customers. A regulatory review is still ahead.
BT Group acquired TalkTalk Telecommunications Limited and PlatformX Communications Limited from the administration of TalkTalk Group on a debt-free basis, BT says, after a prolonged sale process that did not produce a deal. BT then approached TalkTalk's directors and offered to step in. It puts the total cash impact in its current fiscal year at about £400 million (about $530 million, using $1.32 to the pound for every conversion here). BT's breakdown covers the purchase price, transaction and administration costs, working capital, and a trading loss of about £60 million (about $79 million) expected over the rest of the year. It also counts about £100 million (about $130 million) that Openreach, BT's wholesale network subsidiary, would otherwise have received.
TalkTalk's base splits into 1.5 million retail customers and 1 million wholesale customers, BT says. They include vulnerable households and connections used by health, emergency, defense, education, transport, banking and government providers, which is the reason BT gives for not letting the company fail. TalkTalk reported about £1.2 billion (about $1.6 billion) in revenue over the past 12 months and lost money.
BT chief executive Allison Kirkby called the purchase "the only viable option to keep millions of customers connected and supported." The company expects a regulatory review over the coming weeks. Until it ends, BT and TalkTalk will operate separately and keep competing, and TalkTalk customers get access to BT's products only once the process is done. Clive Selley will lead stabilization and integration planning, while Martijn Blanken takes over his role as CEO of BT International.
The Openreach item is the telling line. BT counts as a cost about £100 million that its own network arm would otherwise have received, which shows how closely the two businesses were already tied, and that tie is what a competition review is built to test. BT will report the acquired business as a separate segment and plans to give revenue, EBITDA and capital-spending figures later this fiscal year, once TalkTalk's reporting is aligned with BT's accounting policies. Excluding the deal, it has reconfirmed its financial outlook for the current year and beyond.
