Report Overview

TalkTalk UK: A discount brand pushing a premium product

TalkTalk enjoyed impressive EBITDA growth of 14% in H1 19/20, despite revenue growth pitching down sharply in Q2, and gross margin falling due to the rapid adoption of high speed broadband

The fall in costs was driven by a combination of good expense control and lower subscriber acquisition costs, in part due to improved efficiency, but in part due to a falling subscriber base, which is not a sustainable route to earnings growth

While the current dynamics are challenging, market prices have been firming recently, and should firm further as ultrafast becomes more popular, but TalkTalk needs to move to a more premium pricing position to take full advantage

Contents

Subscriber base drops again

ARPU and revenue dip

New customer pricing drifting up

Pressure on gross margin relieved by cost cutting

List of charts/tables

Figure 1: Legacy versus current gross profit chart

Figure 2: TalkTalk on-net net adds (000)

Figure 3: High speed customers as a percentage of total base

Figure 4: TalkTalk monthly on-net churn

Figure 5: Consumer on-net operating performance

Figure 6: TalkTalk price increases

Figure 7: Group revenue growth

Figure 8: Broadband entry-level pricing, new customers (£/month)

Figure 9: Broadband high speed pricing, new customers (£/month)

Figure 10: TalkTalk direct and indirect pricing

Figure 11: Entry-level broadband pricing

Figure 12: Superfast broadband pricing

Figure 13: Incremental gross profit by product

Figure 14: TalkTalk Group financial results (£m)