TalkTalk shares fall on profit warning and fibre investment plans

8 February 2018, 11:29

Shares in telecoms group TalkTalk have fallen sharply after it issued a profit warning and set out plans to roll out full fibre broadband to three million homes and businesses via a joint venture.

The stock fell by more than 14% during morning trading as the group cut its annual earnings outlook to £230-£245m from a previous range of £270-£300m. By the close of trading, it had recovered slightly to be down 9.7%.

It also said it was reducing its dividend and tapping shareholders for £200m as it invests in growth.

The profits warning follows a previous alert in November when it announced a half-year loss.

Its latest trading update showed a 37,000 rise in net customer additions for the third quarter to the end of December, up from 26,000 in the previous period.

Revenues for the group – whose rivals include Sky, the owner of Sky News, as well as BT and Virgin Media – were up 1% to £388m.

Chief executive Tristia Harrison said: "We said our priority for the year is growth and we are delivering it. The outlook for next year is positive."

But the group admitted that the investment in customer growth would come at a cost to earnings, resulting in the lower outlook.

TalkTalk's fibre plans come after a trial roll-out in York.

It has now agreed with Infracapital – infrastructure investment arm of M&G; Prudential – to create an independent company to build a full fibre network to more than three million homes and businesses in mid-sized towns and cities in Britain.

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

TalkTalk founder and executive chairman Sir Charles Dunstone said: "Looking ahead we see real opportunity to continue growing the core business whilst also investing in full fibre.

"We have therefore strengthened our balance sheet and temporarily reduced our dividend to take full advantage of the opportunities available."

Digital minister Matt Hancock said: "We strongly welcome this commitment by TalkTalk to take full fibre broadband to three million homes and businesses in the UK.”