BT takes over TalkTalk and its 2.5 million customers out of administration

BT Group has acquired TalkTalk’s consumer and wholesale businesses out of administration. They have 1.5 million retail customers and 1 million wholesale customers. BT announced the deal on Monday. It said a prolonged sale process for those operations had been unsuccessful.

BT bought TalkTalk Telecommunications Limited and PlatformX Communications Limited, the wholesale business, on a debt-free basis. It estimates the total cash impact in its 2027 financial year at about £400M. That figure covers the consideration, transaction and administration costs, and working capital impacts. It also includes a trading loss of about £60M. Another £100M or so would otherwise have been due to BT’s Openreach.

TalkTalk reported revenue of about £1.2bn over the last 12 months and was loss-making, BT said. TalkTalk and BT will operate separately and continue to compete while a regulatory review takes place.

“This is a genuinely unprecedented situation, where millions of citizens and businesses were at risk if TalkTalk had collapsed,” said Allison Kirkby, BT Group’s chief executive.

The government intervenes

Lisa Nandy is the Secretary of State for Digital, Culture, Media and Sport. On Monday she issued a Public Interest Intervention Notice under the Enterprise Act 2002, the government said. The Competition and Markets Authority (CMA) will report on competition concerns. The notice then lets her consider the wider public interest. The CMA must report to her by 19 October.

TalkTalk’s networks support calls to emergency services, ambulance and hospital communications and medical alarms, the government said. A number of potential buyers had been unable to agree a sale of the whole business.

“Phone and broadband services are vital national infrastructure. If TalkTalk services fail, there is a genuine risk to life and public services,” Nandy said.

Huawei kit in TalkTalk’s network

BT made a non-binding offer on 2 October. That day, Kirkby wrote to Melanie Dawes, chief executive of the regulator Ofcom. In the letter, which Ofcom has published, she wrote that TalkTalk still operated Huawei kit in some parts of its network. BT’s due diligence indicated this.

BT would keep the TalkTalk legacy network entirely separate from its own network, including its core, she wrote. No Huawei equipment would move into any of BT’s networks. She asked Ofcom to confirm this in writing: that it would treat TalkTalk’s past non-compliance pragmatically and collaboratively, not punitively.

Virgin Media O2 objects

BT has about 31% of the UK retail broadband market, CCS Insight analyst Kester Mann said, according to Bloomberg.

“This has all the characteristics of a stitch up masked as a rescue deal in the public interest,” a Virgin Media spokesperson said.

In the same statement, Virgin Media O2 pointed to the CMA’s plan to potentially block nexfibre’s deal with Netomnia. Virgin Media O2’s owners, Liberty Global and Telefónica, co-own nexfibre with InfraVia. The CMA provisionally found competition concerns on 2 October about nexfibre’s purchase of Substantial, the group that includes Netomnia.