TalkTalk adds 22,000 broadband customers in last quarter
TalkTalk is moving down the road to recovery and with statistics like 59% of broadband customers in a contract from the latest financial reports, driven by the promise of fixed price contracts the company is looking a lot healthier than a year ago. The 22,000 new customers in Q4 bring the annual rise to 49,000 but even with this rise they are still smaller than the heady days of 2014 when they had some 4.2 million broadband customers, but the darkest days are over.
"I’m enjoying having a more ‘hands on role’ at TalkTalk and I’m very excited about the progress we have already made and the prospects for the business. The promotion of Tristia Harrison and Charles Bligh to their new positions has created a clear and simpler operating structure and I can already see the difference they are making. My focus for the company is growth, cash generation and profit – in that order. We will be smart about how we invest, focusing on our fixed network, avoiding other capital intensive distractions. In light of these new priorities, we have also decided to reset the dividend as we look to deliver growth and strong sustainable shareholder returns over the long term."Charles Dunstone, Executive Chairman of TalkTalk
The move away from ADSL2+ to VDSL2 being the largest product is accelerating with apparently 30% of new customers signing up to the VDSL2 products and the up to 76 Mbps variant is twice as popular than a year ago. The operator has some 927,000 of its customers on a fibre based product now (this equates to 25.5% of the on-net customer base of 3.6 million - there are 0.3 million off-net customers in the mix too). It would be dangerous to read too much into the popularity of the up to 76 Mbps product, as to get a better than 1.9 Mbps upload speed you need to buy the top tier product with TalkTalk since they use the Openreach 40/2 product for their standard fibre service. The popularity of fibre is apparent when you consider they added 73,000 new fibre customers in the quarter, the bulk being existing customers upgrading.
The CityFibre UFO York trial is covered and we are told that the initial 14,000 premises passed was hit in March 2017, and the trial has some 2,500 customers, take-up when all providers involved is running at 27%. Build costs of under £500 per home passed are reported, which given the deployment techniques and premise density does not seem unreasonable, we would warn anyone about projections beyond estates of a similar density since the distance between premises can very quickly alter the costings. The planning to cover some 40,000 premises across York is now underway, and with York seeing expansion by operators like Virgin Media it may be the city which lots of homes with a choice from a couple of Gigabit connections in a couple of years.
Continuing our new style of adding examples of the download and upload speed profile from each provider as we cover their financials the TalkTalk ones are above. The split between ADSL2+ and VDSL2 is around 39% on VDSL2 for the testers we saw in April 2017 and was 1% lower in Q1/2017. Seeing a higher number of VDSL2 customers compared to the financial report is not a surprise, since you get a new broadband connection what are you going to do, see how fast it goes. The fact that there are signs the proportion of VDSL2 is increasing is good news. If you look closely on the upload chart you can see hints of a 40/10 product, we believe this the impact from wholesale customers of TalkTalk.
For those wondering why there is no spike from the 2,500 TalkTalk UFO customers, this is because with a broadband userbase of 3.9 million they are currently swamped. We are seeing people testing with one recent test at 207 Mbps down and 69 Mbps up and is in a part of the UFO footprint competing with Openreach FTTP. TalkTalk is also one of the providers selling G.fast which is transitioning from trial to roll-out and an example test is 191 Mbps down and 47 Mbps up.