BT Group has acquired TalkTalk Telecommunications Limited and PlatformX Communications Limited out of the administration of TalkTalk Group on a debt-free basis, protecting service continuity for approximately 2.5 million retail and wholesale customers across the U.K.
BT estimates the acquisition will have a total cash impact of approximately £400 million during fiscal 2027, including consideration and other transaction-related cash effects.
The transaction follows what BT described as a prolonged but ultimately unsuccessful sale process for TalkTalk’s consumer and wholesale operations.
BT said it stepped in because of the potential impact a TalkTalk collapse could have on customers, employees and critical services across the country.
TalkTalk currently serves approximately 1.5 million retail customers and another 1 million wholesale customers throughout the U.K.
Those connections include vulnerable households as well as critical national infrastructure providers operating across healthcare, emergency services, defense, education, transportation, banking and government.
By acquiring TalkTalk Telecommunications and PlatformX out of administration, BT is seeking to maintain those services while stabilizing the businesses.
TalkTalk generated approximately £1.2 billion of revenue during the most recent 12-month period but was loss-making.
BT expects the acquisition to become value accretive over time as the acquired businesses are stabilized, integrated and expected synergies are realized.
A regulatory review of the transaction is expected to take place over the coming weeks.
During that process, BT and TalkTalk will continue operating separately and competing with one another.
BT plans to report the acquired business as a separate reportable segment during fiscal 2027.
The estimated £400 million fiscal 2027 cash impact includes the acquisition consideration, transaction and administration expenses, working capital effects and an expected trading loss of approximately £60 million for the remainder of the current fiscal year.
It also includes approximately £100 million that otherwise would have been received by BT’s Openreach business.
BT plans to provide further information about the acquisition’s impact on revenue, EBITDA and capital expenditures after TalkTalk’s financial reporting has been aligned with BT’s accounting policies and the company completes acquisition accounting later in the fiscal year.
The company reconfirmed its existing fiscal 2027 and multi-year financial outlook metrics excluding the impact of the TalkTalk transaction.
BT continues to expect normalized free cash flow of approximately £2 billion during fiscal 2027 and approximately £3 billion by the end of the decade, excluding effects related to the acquisition.
The company also reaffirmed its credit rating objectives.
BT remains committed to a target credit rating of BBB+/Baa1 and a minimum rating of BBB/Baa2.
The company also plans to continue increasing its dividend by a low- to mid-single-digit percentage annually beginning in fiscal 2027 until it reaches financial metrics consistent with a BBB+ credit rating.
After those metrics are achieved, BT said residual cash flow will be available for enhanced shareholder distributions.
BT has appointed Clive Selley CBE to immediately lead the stabilization of the acquired businesses and planning for their integration into BT Group.
Martijn Blanken will assume Selley’s role as CEO of BT International while also continuing as CEO-designate of BT’s proposed international joint venture with Verizon.
The transaction expands BT’s direct exposure to both retail broadband customers and wholesale communications customers at a time when the company is continuing to invest heavily in its U.K. network infrastructure.
BT expects to invest more than £40 billion in U.K. infrastructure between 2020 and 2030.
The company is also working toward bringing full-fiber connectivity to 30 million homes and businesses and 5G+ mobile service to 99% of the U.K. population.
BT Group’s operations include its Consumer and Business units along with Openreach, its independently governed and wholly owned fixed-access infrastructure subsidiary.
Openreach provides wholesale infrastructure services to more than 700 communications providers across the U.K.
KEY QUOTES:
“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 postcode. We have been connecting the nation for generations, stepping up in the moments that matter, and BT acquiring TalkTalk is now the only viable option to keep millions of customers connected and supported.
Our immediate priority is to stabilise the business and provide a safety net for the households and businesses who rely on TalkTalk. Once the regulatory process has been concluded, TalkTalk’s customers will benefit from access to the UK’s best network, and the full range of market-leading products and services that BT offers. And, over a period of time, the transaction will create value for all our stakeholders – customers, colleagues, the country, and our owners.”
Allison Kirkby, Chief Executive of BT Group
