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February 8, 2018

Full fibre plans backfire for TalkTalk as profits slump

TalkTalk aims to bring full fibre to 3 million homes amid profit slump.

By April Slattery

Shares of telecoms provider TalkTalk fell by over 10% after warnings from the company that profits are to be significantly lower than expected for this year.

The company’s shares fell by 14% during morning trading, following predictions that profits are only expected to be between £230m and £245m this year. These figures differ significantly from what the telecoms company predicted to be between £270m and £300m in just November last year.

As well as shares falling, dividends among the network provider also crumbled as the company announced its plans to raise a total of £200m by selling shares. The money raised is set to be invested in a network of fibre cables, which will be used to provide much higher broadband speeds for customers.

Full fibre plans backfire for TalkTalk as profits slump

TalkTalk aims to bring full fibre to 3m homes and businesses.

Despite the profit slump and falling shares TalkTalk’s Executive Chairman, Charles Dunstone has stayed positive. According to the BBC Dunstone said: “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.”

TalkTalk’s long-term plan is to develop a full fibre network that will provide superfast broadband to over three million homes and business across the UK, competing against rivals such as BT and Vodafone.

In order to carry out its plan, the telecoms provider has teamed up in a joint venture with Infracapital. The Infrastructure investment strand of M&G Prudential will hold 80% of the new venture, providing a £400m investment. In comparison, TalkTalk will own 20% and bring a £100m investment to the table. In total there will be £1.5bn in investment made, two-thirds of it coming from debt.

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Shareholders may not be thrilled at the latest announcement, but Culture Secretary Matt Hancock certainly was. He welcomed the investment into full-fibre broadband, hoping it will boost his and Chancellor Philip Hammond’s goal of the UK becoming a digital leader in 5G and full-fibre.

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

The company could rekindle its profits if the new full fibre investment is a success. However, rivals Vodafone are already working in partnership with CityFibre to provide full-fibre to towns and cities across the UK starting with Milton Keynes.

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