TalkTalk says it is making decent progress in both its demerger process and related debt refinancing plan, but is keeping quiet about an ever-increasing raft of M&A rumours.

Mary Lennighan

February 15, 2024

3 Min Read

The UK telco is working on separating its consumer broadband arm from its network wholesale platform business, and it's all going well, according to a progress update it published earlier this week.

We'll have to take TalkTalk's word for that though, given that the update in question was more than a little light on detail.

TalkTalk Consumer and PlatformX Communications – or PXC, as TalkTalk has taken to calling the wholesale services provider – will trade independently from 1 March, with a long-term wholesale agreement in place that will enable the consumer business to use the PXC network, TalkTalk said.

It then gave a rundown of the two businesses' various activities and noted that the existing TalkTalk Holdings board will remain in place until the refinancing element of the plan is complete, with Sir Charles Dunstone continuing as Chair and Dame Tristia Harrison as CEO in the meantime.

That sounds like a solid plan...but there's nothing new in it. We already knew all that.

"The Group is well advanced in defining and delivering material cost benefits associated with the separation," TalkTalk concluded.

Again, we'll have to take that on trust.

There seems to be a bit more to report on the refinancing side. TalkTalk said it has entered into an exclusivity agreement with a global financial institution to progress its offer of a significant investment of new equity into PXC, subject to due diligence, regulatory approvals and so forth. The firm added that it is working with the same unnamed financial institution to raise new debt facilities on PXC from third party lenders. It is also working on a debt raising process with regard to TalkTalk Consumer.

Ultimately, TalkTalk believes the total proceeds from all of the above will be enough to refinance its existing debt facilities in full.

That's obviously good news for TalkTalk, albeit not that exciting to read about. But what we really want to know is what's going on behind the scenes with regard to the arrival of potential new investors or even owners. But TalkTalk is keeping its own counsel.

UK newspaper the Telegraph at the weekend reported that Virgin Media O2 is preparing a new bid for TalkTalk Consumer, just over a year after it backed away from a previous bid for the whole of TalkTalk.

As TalkTalk has just reminded us, its Consumer business has 2.4 million residential broadband customers; despite the fact that we're talking about a fairly low-spend customer base here, they would provide some increased scale for VMO2. But no one is publicly commenting on that rumour.

Since then it has come to light that Australia's Macquarie is after a sizeable stake in PXC. Sky News' sources claim that the firms could sign an exclusivity deal as soon as this week, while noting that there has been interest from other would-be investors, including Digital Bridge. The sources claim that Macquarie could invest £450 million into the wholesale unit and pick up a stake of 40%, or possibly slightly more.

Given that such an investment would help TalkTalk reduce its debt pile as it goes through that refinancing process, it seems like a credible rumour. And one that is perhaps more likely to come to fruition than the reported VMO2 takeover. With a bit of luck we'll have something concrete before too much longer.

We knew when TalkTalk announced plans to split itself into three back in September that it would likely be the end of an era for the UK operator. Aside from Consumer and PXC, TalkTalk also separated out its Business Direct business services division and quickly sold it off to shareholders for £95 million. It's starting to look like a change in ownership also looms for the other two.

But we can't be sure of that yet, because TalkTalk is not talking.

About the Author(s)

Mary Lennighan

Mary has been following developments in the telecoms industry for more than 20 years. She is currently a freelance journalist, having stepped down as editor of Total Telecom in late 2017; her career history also includes three years at CIT Publications (now part of Telegeography) and a stint at Reuters. Mary's key area of focus is on the business of telecoms, looking at operator strategy and financial performance, as well as regulatory developments, spectrum allocation and the like. She holds a Bachelor's degree in modern languages and an MA in Italian language and literature.

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