Interim Management Statement

Released: 07 Feb 2012

RNS Number : 9066W
TalkTalk Telecom Group PLC
07 February 2012
 



 

 

7th February 2012

TalkTalk Telecom Group PLC

Interim Management Statement - Third Quarter FY 2011/12

 

·    Raising full year EPS guidance by 6% to 17.0p-17.5p

·    Raising full year EBITDA margin guidance to 18%-19%

·    Continued improvement in customer mix with 90% of base on-net

·    Targeted cost savings being achieved ahead of schedule

·    Continuing improvement in customer experience has stabilised churn

·    YouView launch on track

 

Q3 operating metrics

63,000 fully on-net customers added

90% of customers now on-net

22% of customers now on Plus

Total revenue                  £422m (Q2: £421m)

Broadband revenue         £312m (Q2: £307m)

Broadband ARPU            £25.3 (Q2: £24.7)

Dido Harding, Chief Executive of TalkTalk commented:

"As a result of the success of our unbundling programme, ARPU growth and earlier than expected delivery of cost savings, we are raising full year EBITDA and EPS guidance.

We have continued to improve our customers' experience with further falls in customer service call volumes and an increase in the rate of online self-service. As a result, churn has stabilised and we remain confident of a return to positive total net adds in the first half of 2012. 

Our operational achievements and strong financial performance give us confidence as we look ahead to delivering an exciting strategic agenda through 2012, including the launch of our TV proposition."

 

Analyst and investor conference call: 8.00am

UK/International:          +44 (0)20 7136 2050

USA:                                      164 6254 3388

Confirmation Code:                         5616894

 

Replay: Available until 12.00am 14/02/12

UK:                                +44 (0)20 7111 1244

USA:                              +1 347 366 9565

Access code:                561689#

Audio webcast:

http://www.media-server.com/m/p/nox453ek


 

Analyst and investor enquiries

Media enquiries

Mal Patel                      +44 (0)203 417 1037

Mark Schmid                  +44 (0)75 1503 4676

 

The Group expects to announce its Preliminary Results on 17th May 2012.



Business Review

A more profitable customer mix

We unbundled 130 new exchanges during the quarter and expect to unbundle a further 119 exchanges in the final quarter to deliver 450 new exchanges in the full year, extending the geographic reach of our higher margin value proposition.

Our strong value-for-money credentials continue to attract new customers, and gross additions have remained resilient in the quarter.

We added 63,000 net new MPF broadband and voice customers in the quarter, offset by the net loss of 46,000 SMPF broadband-only customers, leading to net growth in our on-net base of 17,000. The off-net base continued to decline with 60,000 fewer customers contributing to a total broadband customer reduction of 43,000 during the quarter.

On-net customers now comprise 90% of our total base and the mix of customers on the base has continued to improve with over 80% now fully unbundled (MPF) and therefore able to benefit from our added value products such as Plus and HomesafeTM, compared to just over 75% at the end of Q3 last year. 

Our MPF customers save money but generate, on average, 50% greater value to the group over their lifetime than partially unbundled (SMPF) customers, and over three times more value than off-net customers.

Growing ARPU

Take up of our value-added Plus, Boost and HomesafeTM products continued to grow during the quarter.  Around a third of our new customers consistently opt to take the Plus proposition, which together with our successful upselling initiatives into the Essentials base meant that at the end of the quarter we had 883,000 Plus customers - 22% of the base and we are on track to have over 1 million Plus customers by the year end.

HomesafeTM, our unique and ground breaking network-level security and safety service, was activated by a further 60,000 customers bringing the total number benefitting from our service, to 270,000. We are extremely proud of HomeSafeTM and were delighted to be awarded the Broadband Innovation award at the uSwitch awards in January.

Stabilising churn

During the quarter, we completed the final billing system migration of the Pipex base, which comprised a number of complex products and tariffs.  As part of this process we disposed of a residual base of 7,000 customers who could not be migrated onto our MPF network.

At the same time we continued to make significant improvements to our customers' experience during the quarter. Call volumes into our customer service centres fell again during the quarter, with 26% fewer calls than a year ago and 60% of customer contacts are now taking place online, reflecting our improved self-serve capabilities. 

As a result, in spite of the disruption caused by the final stage of the Tiscali migration, overall churn levels remained stable on the previous quarter.

TalkTalk Business

TalkTalk Business performed in line with our expectations during the quarter.  Revenues fell modestly with seasonally lower voice usage over the Christmas period.



Financial Review

Group revenues remained stable during the quarter, in line with our guidance.

Total revenue of £422m was in line with Q2, reflecting improving ARPU and the mix effect of growing numbers of high value MPF customers, which offset the impact of SMPF and off-net churn.

Broadband revenue grew by 1.6% to £312m quarter on quarter, reflecting ARPU growth from £24.7 to £25.3 driven by upsell and Plus take-up; and the price changes effected at the beginning of October.

As expected, broadband revenue growth was partially offset by the quarter on quarter declines in non-broadband and TalkTalk Business revenue.

We have continued to make progress on cost reduction and have seen acceleration in the delivery of savings during the quarter from our simplification and customer service initiatives.

 

Full year outlook

We continue to expect second half revenues to be in line with those reported for the first half.

As a result of the success of our unbundling programme; ARPU growth; and earlier than expected delivery of cost savings, we are raising full year EBITDA and EPS guidance.  

We now expect full year EBITDA margins of 18%-19% (previously 17%-18%) and EPS of 17.0p-17.5p (6% ahead of the previous 15.5p-16.5p guidance).



 

Quarterly Metrics

 


FY 2010/11

FY 2011/12


BROADBAND

Q1

Q2

Q3

Q4

Q1

Q2

Q3











NET ADDS ('000)









On-Net

157

174

130

36

35

26

17

*

Of which:









MPF

223

173

79

65

76

83

63

*

SMPF

(66)

1

51

(29)

(41)

(57)

(46)


Off-net

(124)

(156)

(155)

(61)

(62)

(69)

(60)


TOTAL

34

18

(25)

(25)

(27)

(43)

(43)

*










BASE (millions)









On-net

3.267

3.441

3.571

3.607

3.642

3.668

3.685


Adjustment







(0.007)

*

Closing on-net

3.267

3.441

3.571

3.607

3.642

3.668

3.678


Of which:









MPF

2.434

2.607

2.686

2.751

2.827

2.910

2.966


SMPF

0.833

0.834

0.885

0.856

0.815

0.758

0.712


Off-net

0.964

0.808

0.653

0.592

0.530

0.461

0.401


TOTAL

4.231

4.249

4.224

4.199

4.172

4.129

4.079


On-net (%)

77%

81%

85%

86%

87%

89%

90%


ARPU (£)

23.9

24.7

24.9

25.0

24.7

24.7

25.3











EXCHANGES









New LLU

112

149

4

0

30

171

130


Total LLU

1,854

2,003

2,007

2,007

2,037

2,208

2,338











NON-BROADBAND









Total Base (m)

0.910

0.838

0.755

0.678

0.621

0.573

0.525


ARPU (£)

19.3

18.1

20.1

17.7

18.8

18.1

18.8











REVENUE (£m)









Broadband

301

314

316

316

310

307

312


Non-BB

56

47

48

38

36

33

31


B2B

87

82

80

80

77

81

79


Total Revenue

444

443

444

434

423

421

422











* Net adds are stated pre adjustment for the sale of 7,000 customers that could not be migrated onto our network




 

 


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