BT Group plc has acquired TalkTalk Telecommunications Limited and PlatformX Communications Limited out of administration, saving 900 jobs.
The cost to BT is around £400 million, the company said. This includes transaction and administration costs, working capital, a £60m trading loss and £100m in uncollected Openreach revenue.
All employees at Salford-headquartered TalkTalk will move across as part of the deal.
TalkTalk, founded two decades ago by Sir Charles Dunstone, is the UK’s fourth biggest broadband company. It floated on the London Stock Exchange in 2010, when it demerged from Carphone Warehouse.
In 2021 it was taken private and valued at around £2 billion, including debt, in a deal involving London-based hedge fund Toscafund. However its customer numbers have since dwindled from a high of four million in 2019 to around 1.5m today. Reports suggest it has effectively been controlled by its lenders since then, led by the US private credit group Ares Management.
Its wholesale division PXC has around a million customers, including thousands of vulnerable customers as well as hospitals, doctors surgeries and other areas of critical national infrastructure.
A Sky News report suggests that TalkTalk was left in dire straits after FTSE 100 firm BT rejected a proposal from private equity firm Epiris relating to PXC, and that Epiris had asked BT to forego repayment of at least £300m owed by TalkTalk to BT’s Openreach subsidiary.
PXC typically pays between £60m and £80m every month to Openreach to lease its infrastructure, the report claimed.
“After a prolonged, but ultimately unsuccessful, sale process for TalkTalk’s consumer and wholesale (PXC) operations, BT recognised the risk to the country, and especially vulnerable customers and key public services, should the company collapse,” BT stated.
“BT therefore approached the directors of TalkTalk and offered to step in immediately, in the public interest, to protect customers and critical national infrastructure.
“By acquiring the business out of administration, BT will be providing much needed and immediate reassurance for TalkTalk’s employees, its 1.5 million retail customers and its 1 million wholesale customers across the UK.
“This includes vulnerable households, and connections that support critical national infrastructure providers across health, emergency services, defence, education, transport, banking and government.”
During the last 12 months, TalkTalk reported revenues of c£1.2bn and was loss-making.
BT expects a regulatory review of the transaction to take place over the coming weeks, pending which TalkTalk and BT will operate separately and continue to compete.
Allison Kirkby (pictured), chief executive of BT, said: “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.”
Clive Selley CBE, CEO of BT International, will lead the stabilisation and integration planning of the acquisition. Martijn Blanken will take over his role, in addition to being CEO-Designate of BT’s proposed international joint venture with Verizon.
Reports suggest that BT has agreed to pay £100m to Ares Management as part of the deal, while investment giant KKR will receive around £60m.
TalkTalk shareholders including Sir Charles will be wiped out.