Sky keen to buy TalkTalk's business arm

Sky has joined the race for TalkTalk’s business services arm, according to a UK media report this week, which claims a deal could be imminent.

The TV and telecoms firm is one of a small number of potential buyers for TalkTalk Business Direct, the Sunday Times reported, without citing sources. The paper also named business comms provider Daisy Group as a likely suitor.

Conjecture over the future of TalkTalk and its various assets is nothing new; speculation has been rife for a number of years, with various UK telecoms players looking to bulk up. With regard to TalkTalk’s business operations, the first solid rumours came earlier this year when Sky News reported that the assets were up for sale and that the telco had appointed US-based investment bank Houlihan Lokey to handle the sale.

At the time the news outlet claimed that TalkTalk Business Direct could go for as much as £200 million, but the Sunday Times posits a lower figure, suggesting the unit plus its 80,000 customers will fetch £150 million.

It had nothing more to say on the subject of Sky being in the running for TalkTalk Business Direct, but it’s easy to see why the firm’s name is on the list.

Sky was linked with a possible acquisition of the whole of TalkTalk less than 18 months ago. TalkTalk reportedly received tentative approaches from a handful of players, Sky and Vodafone among them, no deal materialised. With TalkTalk founder Charles Dunstone said to have valued the business at around £3 billion, it is perhaps unsurprising that the rumours came to nought.

A deal for TalkTalk in its entirety would arguably make more sense for Sky, assisting it in its quest to build scale and compete more effectively against the likes of BT. But a leg-up in the business market would also be valuable for Sky as it seeks to grow its own Sky Business arm.

It is not the only company interested though. The aforementioned Daisy Group brokered a £175 million deal to acquire TalkTalk Business Direct in May 2018, but the deal collapsed less than two months later. Neither company gave much away as to the reasons for their failure to agree final terms.

Daisy’s willingness to come back to the table, presuming the media reports is correct, suggests there was nothing fundamentally incompatible between the pair. It’s not too much of a stretch to suggest that the new lower valuation might be in play.

There are, of course, numerous business-focused telecoms and broadband providers in the UK for whom that could also be the case.

We’re likely to find out more before too much longer. The paper reports that TalkTalk’s advisors from Houlihan Lokey hope to complete the sale in the coming weeks.

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