Source: Sharecast
BT estimated the total cash impact of the acquisition in FY27 at around £400m, comprising consideration, transaction and administration costs, working capital impacts as well as a trading loss of approximately £60m and non-receipt of circa £100m otherwise due to Openreach.
The company said it recognised the risk to the country, "and especially vulnerable customers and key public services, should the company collapse". As a result, it approached the directors of TalkTalk and offered to step in immediately, in the public interest, "to protect customers and critical national infrastructure".
BT said it will be providing "much needed and immediate" reassurance for TalkTalk's employees, its 1.5 million retail customers and its 1m wholesale customers across the UK.
In the last 12 months, TalkTalk reported revenues of around £1.2bn and was loss-making. Over a period of time and through the integration into BT Group, "the acquisition will become value accretive as the business is stabilised and synergies are realised", it said.
Chief executive Allison Kirkby said: "This is a genuinely unprecedented situation, where millions of citizens and businesses were at risk if TalkTalk had collapsed. BT is the digital backbone of the country, with a presence in every postcode. We have been connecting the nation for generations, stepping up in the moments that matter, and BT acquiring TalkTalk is now the only viable option to keep millions of customers connected and supported.
"Our immediate priority is to stabilise the business and provide a safety net for the households and businesses who rely on TalkTalk. Once the regulatory process has been concluded, TalkTalk’s customers will benefit from access to the UK’s best network, and the full range of market-leading products and services that BT offers. And, over a period of time, the transaction will create value for all our stakeholders - customers, colleagues, the country, and our owners."
At 1223 BST, BT shares were 1.6% higher at 199.35p.
Russ Mould, investment director at AJ Bell, said: "BT clearly sees some short-term pain involved in acquiring debt-ridden rival TalkTalk as justified by the long-term gain."
Mould said BT has been given leeway on competition concerns because the UK government is worried about the risks involved in TalkTalk collapsing, not least thanks to its position as a supplier of services to the Ministry of Defence.
"However, the deal may still draw scrutiny from rivals and TalkTalk’s own creditors, with some reports of possible legal action, meaning this may not be the last word in the story," he said. "While TalkTalk’s customer base has been steadily whittled down by tough competition in the broadband market, it still had some 1.6 million customers as of this May.
"Adding these customers to its ranks will entrench BT’s competitive position, even if the company will have to take a sizeable initial cash hit as it progresses the deal.
"BT will hope the transaction can inject further life into recovery efforts which have managed to dial up a 90%-plus total return since Kirkby took the helm in early 2024."
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