TalkTalk shares slump on profit warning as firm targets fibre launch
SHARES in TalkTalk have tanked after the telecoms group warned over profits while unveiling plans to roll out full fibre broadband to three million homes and businesses through a joint venture with Infracapital.
The firm slashed its annual earnings outlook to between £230 million and £245 million from £270 million to £300 million, sending shares into a double digit percentage slide during morning trading on the London Stock Exchange.
TalkTalk said £1.5 billion would be invested in the new broadband company, helping to ramp up competition and shift the UK's digital infrastructure in line with major European nations.
Infracapital, an infrastructure investment arm of M&G Prudential, will take an 80 per cent slice of the new firm and make an initial £400 million investment, with TalkTalk owning 20 per cent and stumping up £100 million.
The move comes as TalkTalk tapped investors for £200 million to shore up its balance sheet, help drive customer growth and underpin its fibre investment plans.
The share placing will be 19.99 per cent of existing share capital, with executive chairman Sir Charles Dunstone and other top-level bosses taking up to £40 million.
However, the firm said it would have to cut its dividend to 2.5p in order to fund the investment drive.
Sir Charles 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.
"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."
The firm also gave a performance update, with customer numbers rising by 37,000 in the third quarter, compared with 26,000 in the quarter before.
Churn levels - the rate of customers moving to another provider - dropped to 1.3 per cent over the three-month period in contrast to 1.6 per cent in 2017.
Chief executive Tristia Harrison said the outlook for next year was "positive" and was on track for 15 per cent earnings growth.
She added: "We said our priority for the year was growth and we are delivering it.
"In Q3 we built on the strong customer growth over the first half with another material step-up in net adds, the fourth consecutive quarter of growth in the retail and B2B businesses."
Shares in TalkTalk also slumped in November after the telecoms group dived to a half-year loss and warned over profits as it took a hit from efforts to secure more customers.
The FTSE 250 firm booked a loss of £75 million for the six months to the end of September, down from a £30 million profit for the period last year.
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.
"This investment will make significant strides in giving Britain the connectivity we need to be fit for the future."