TalkTalk hailed the success of its quad-play strategy after reporting its “strongest growth ever” in take-up of combinations of mobile, fibre broadband and TV products in the third quarter of its 2014/2015 financial year.
The company said revenue grew 4.2% year on year to reach £449 million, and is on track to grow by 4% in the full financial year. However, Jefferies analysts noted that the company has restated its previous year’s figures to reflect an HMRC ruling on treatment of VAT, “which has the effect of boosting headline revenue and ARPU growth rates”, the analysts said in a research note.
Furthermore, the company said the cost of signing up more customers to its various plans would hit its full-year profit, with full-year EBITDA expected to be towards the lower end of market expectations.
According to Reuters, CEO Dido Harding said "associated cost savings are taking longer to come out", but she was more confident the group would be able to deliver greater savings in the next two years.
The UK-based telecoms operator reported strong take up of its mobile plans, noting that 50,000 new customers signed up to TalkTalk Mobile and enabled the unit to take 11% of the total UK SIM market in December, “ahead of Vodafone and Tesco Mobile”. It noted that about 10% of its customers now take TalkTalk Mobile.
TalkTalk also added 115,000 new TV customers and 88,000 new fibre customers in the Q3 period, and said the number of overall broadband customers increased by 15,000 with decelerating churn rates.
"Today’s results demonstrate the strong and growing demand for our value-for-money products, as we saw our strongest ever quarter of TV, mobile and fibre adds with our lowest ever reported churn. We are excited about the future of quad-play,” said Dido Harding, TalkTalk CEO.
The company boosted its quad-play strategy–which refers to the sale of combined packages of mobile, TV, fixed voice and fixed broadband–last year by forming a multi-year mobile virtual network operator (MVNO) agreement with Telefonica UK. The company is following a similar strategy to rivals BT, Sky and Virgin Media by adding mobile services to its mix. Mobile operators have also been considering their options, with Vodafone looking at fixed opportunities and O2 UK and 3UK in merger discussions.
Looking ahead, TalkTalk has reiterated approx. 4% CAGR and 25% EBITDA margin targets for the medium term, which Jefferies noted appears to refer to the financial year to the end of March 2017.
The company also recently agreed to acquire supermarket chain Tesco’s Blinkbox streaming service and broadband customer base, and said this deal “will accelerate development of TalkTalk TV by delivering key services significantly faster, such as a TV app to customers for in and out of home viewing on multiple devices.”
