BT has agreed to buy the broadband supplier TalkTalk out of administration in a £400m rescue deal that will save 900 jobs.
The company said it had struck a deal to acquire TalkTalk and its wholesale business PlatformX Communications (PXC) on a debt-free basis, in a move that is expected to cost it £400m.
The deal, which will add a further 1.5 million UK retail broadband customers to BT, will trigger a regulatory review by the Competition and Markets Authority (CMA).
But the secretary for digital, culture, media and sport, Lisa Nandy, intervened on Monday after the acquisition was confirmed, invoking a public interest intervention notice “to ensure that impacts on public health, critical national infrastructure and supply to vulnerable customers are fully considered as part of this process”.
TalkTalk has about 250,000 vulnerable customers, thousands of whom are disabled or elderly and rely on wearable pendants, known as telecare devices, which are connected to the old copper network and trigger alerts in a medical emergency.
In 2023, two vulnerable people died when their devices failed during a switch from copper to digital landlines.
TalkTalk’s PXC arm has about 1 million wholesale customers including critical nationalinfrastructure providers across health, emergency services, defence, education, transport, banking and government.
Nandy said her department was acting under Enterprise Act powers, allowing her to consider the wider public interest once the CMA has reported back by 19 October on any competition concerns raised by the tie-up.
Virgin Media O2 (VMO2), which had also looked at buying TalkTalk and also operates as a rival to BT’s Openreach, reacted angrily to the deal, calling it a “stitch-up” that would further boost BT’s dominant position.
Last week, the UK competition watchdog cited “substantial” concerns over nexfibre, the joint venture between VMO2’s owners Liberty Global and Telefónica and InfraVia, attempting to push through a £2bn deal to buy its rival Netomnia.
“This has all the characteristics of a stitch-up masked as a rescue deal in the public interest,” said a spokesperson for the company. “Just days after the competition regulator proposed potentially blocking a logical deal between nexfibre and Netomnia … it now appears that rules might be watered down so [that Openreach] can roll its tanks over competition and further tighten its grip on the market. We don’t believe rules should be thrown out the window to allow TalkTalk to fall into BT’s lap without a proper process and we will be raising our concerns directly with government and regulators.”
BT is the biggest broadband provider in the UK, with a market share of about 30%, according to estimates by Enders Analysis. Openreach, the broadband network owned by BT, is also TalkTalk’s biggest supplier.
BT, whose shares rose almost 2% after the deal was announced, said it expected to report a £400m cash hit from the takeover in its current financial year.
This is comprised of transaction and administration costs and working capital, as well as a £60m trading loss and £100m in uncollected Openreach revenue.
Allison Kirkby, the BT chief executive, said it was “a genuinely unprecedented situation, where millions of citizens and businesses were at risk if TalkTalk had collapsed”. She said: “Our immediate priority is to stabilise the business and provide a safety net for the households and businesses who rely on TalkTalk.”
She said Nandy’s intervention reflected the “critical nature of the services that this industry provides and the scale of impact TalkTalk would have had if it had gone into liquidation and failed as an entity. It was BT that stepped in as we became aware that all other alternatives were no longer an option for the [TalkTalk] directors to consider.”
Melanie Dawes, the chief executive of the telecoms regulator, Ofcom, said that she welcomed a commercial deal to protect customers and critical communications services, but had also written to BT to “underline our expectations”.
“The transaction will now be subject to the appropriate clearances and we will be working closely with the government and the CMA during that process,” she said. Existing regulatory obligations will continue to apply. We will keep a close eye on the transition to protect consumers and competition.”
Kirkby said it was “too early to conclude” whether BT would maintain the TalkTalk brand, but that for now nothing would change for customers of the UK’s fourth-biggest broadband company and there was “nothing they need to do differently”.
TalkTalk has struggled in a highly competitive telecoms market, with its retail customer numbers dwindling from 4 million in 2019 to about 1.5 million this year.
Its founder, Charles Dunstone, engineered a £1.1bn deal with the London-based hedge fund Toscafund in 2021 to take the company private, which saddled the business with about £1.5bn in total debt. Since then it has, in effect, been under the control of its lenders, led by the US private credit group Ares Management.
The deal with BT ends Dunstone’s prolonged efforts to sell TalkTalk. Administrators at Alvarez & Marsal Europe said the sale would transfer all 900 employees at TalkTalk’s consumer and broadband business and PXC to BT.
The companies would operate separately and continue to compete until the regulatory review is over, BT said in a statement. TalkTalk, which is headquartered in Salford, reported revenues of about £1.2bn over the past 12 months and was loss-making, BT said.
The UK’s fourth-largest broadband company was founded in 2003 by Dunstone as a subsidiary of Carphone Warehouse.