BT has bought the failed broadband provider TalkTalk out of administration to protect 2.5m customers, at an estimated cash cost of about £400m this financial year, with a regulatory review still to come.
BT Group (LON: BT.A), the telecoms group behind BT, EE, Plusnet and Openreach, bought TalkTalk Telecommunications and PlatformX Communications out of administration this morning. It called the deal a rescue, and its shares were up 1.50% by 8.20am.
BT stock stood at 199.25p in a delayed quote, against Friday’s close of 196.3p. That sits mid-range for the quarter, between a low of 186.45p on the 1st of July and a high of 208.2p on the 17th of September.
BT’s stock exchange announcement, published at 7.11am before the market opened, said the purchase followed a prolonged and unsuccessful sale process. BT bought the debt-free businesses and did not disclose the price. It said the aim was to protect 2.5m customers, 1.5m retail and 1m wholesale, and critical services.
Allison Kirkby, BT’s chief executive, described the stakes.
This is a genuinely unprecedented situation, where millions of citizens and businesses were at risk if TalkTalk had collapsed.
Allison Kirkby, BT
BT estimates the total cash impact in its 2027 financial year at about £400m. That figure combines the undisclosed consideration, transaction and administration costs, working capital, a trading loss of about £60m and about £100m of payments from TalkTalk to Openreach, BT’s network arm, that will not be received.
The deal carries costs and risks. TalkTalk is loss-making, with revenue of about £1.2bn over the last 12 months, and BT said the deal will be accretive, meaning it adds to earnings, only over a period of time. A regulatory review will run over the coming weeks, and the two companies will operate separately and keep competing.
BT also reconfirmed its outlook, which excludes the deal: normalised free cash flow of about £2.0bn in the 2027 financial year and about £3.0bn by the end of the decade, low-to-mid single-digit dividend growth, and a target of BBB+ and Baa1 credit ratings.
TalkTalk will be reported as a separate segment in the 2027 financial year, and BT said the effects on revenue, EBITDA (earnings before interest, tax, depreciation and amortisation) and capital spending will come later this fiscal year.
