- BT is buying TalkTalk and its subsidiary PlatformX for about $540 million
- Allison Kirkby, BT’s CEO said, “This is a genuinely unprecedented situation."
- New Street Research analyst James Ratzer said the deal “could end up being a very accretive deal for BT."
British Telecom (BT) is buying TalkTalk Telecommunications and its subsidiary PlatformX Communications for about $540 million (£400 million). BT said it’s buying the companies to “keep them out of administration,” which is a U.K. process similar to bankruptcy in the U.S.
BT said that by buying the companies it is protecting services for 1.5 million TalkTalk residential broadband customers along with 1 million wholesale customers.
TalkTalk and PlatformX were taken private by Toscafund in 2021 and subsequently backed by major creditor Ares Management. TalkTalk is not an infrastructure-based broadband provider. Rather, it relies on wholesale network providers, including BT’s Openreach network to support the delivery of its retail services.
Today, BT said in a statement, “After a prolonged, but ultimately unsuccessful, sale process for TalkTalk’s consumer and wholesale (PXC) operations, BT recognized the risk to the country, and especially vulnerable customers and key public services, should the company collapse. BT therefore approached the directors of TalkTalk and offered to step in immediately, in the public interest, to protect customers and critical national infrastructure.”
During the last 12 months, TalkTalk reported revenues of about $1.58 billion (£1.2 billion) and was loss-making.
But BT said that over time and through the integration into BT Group, the acquisition will become value accretive as the business stabilizes and synergies are realized.
BT expects a regulatory review of the transaction to take place over the coming weeks, during which TalkTalk and BT will operate separately.
Allison Kirkby, BT’s CEO said, “This is a genuinely unprecedented situation, where millions of citizens and businesses were at risk if TalkTalk had collapsed. BT is the digital backbone of the country, with a presence in every post code. BT acquiring TalkTalk is now the only viable option to keep millions of customers connected and supported.”
James Smith, TalkTalk Group’s CEO, said, “The transactions announced today provide long-term strength, investment capacity and certainty for our two operating businesses. They also provide stability for colleagues, customers, suppliers and partners.”
New Street Research analyst James Ratzer said the deal “could end up being a very accretive deal for BT, despite the £400 million upfront cash cost - and almost certainly better than other outcomes.”
Ratzer said TalkTalk will give BT “more optionality at the lower end of the market” and there will likely be cost synergies due to “significant overlap with BT’s existing cost infrastructure.”
But TalkTalk has been losing subscribers at a regular clip. Ratzer said the underlying TalkTalk customer base is currently declining at about 100,000 to 130,000 subscribers per quarter on a base of 2.5 million.
“BT’s competitors will likely sniff an opportunity to market to these customers as offering a cheaper alternative to a BT migration,” he said. “So, BT will need to move quickly in order to secure those customers with new contracts to lock them in."
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