TalkTalk reportedly mulling £200 million sale of B2B unit

Rumours regarding TalkTalk’s future have a become a semi-regular occurrence, and a fresh batch of them was served up this week.

Late on Monday, Sky News reported that the B2B arm, TalkTalk Business Direct, is on the block and could bring in up to £200 million. The division serves 80,000 business customers. Last year it turned over £85 million and generated earnings before interest, tax, depreciation and amortisation (EBITDA) of £17 million. US-based investment bank Houlihan Lokey has been hired to handle the sale.

As usual, these rumours come courtesy of mysterious-sounding ‘insiders’, so as always, it is difficult to assess their veracity.

However, subscribers to the old adage of there being no smoke without fire have seen a lot of smoke swirling around TalkTalk in recent years.

Just last November, Virgin Media O2 (VMO2) reportedly gave up on trying to buy all of TalkTalk outright in a deal rumoured to be worth £3 billion. The report claimed the two had decided to hammer out a smaller-scale wholesale deal instead, but nothing seems to have come of that either.

VMO2 was recently linked with a £3 billion move for altnet CityFibre, and if those rumours are accurate, then it suggests the cableco isn’t averse to a bit of M&A. However, forking out for TalkTalk’s B2B arm won’t do much for its fibre footprint, which seems to be VMO2’s primary concern of late.

Meanwhile, last April, TalkTalk reportedly received tentative approaches from Vodafone and Sky, the logic being that it would bolster the former’s position in the fixed-line market, and enable the latter to mount a stronger challenge to BT and VMO2.

Again though, buying TalkTalk’s B2B operation wouldn’t do much for Voda or Sky in this regard.

Therefore a more likely suitor would be a rival B2B provider that has eyes on TalkTalk’s corporate customer base.

Anyone wondering why TalkTalk keeps getting linked with potential buyers need only a quick look at its annual report. It contains clues as to why TalkTalk might need to bring in some cash, and why rumours persist that some or all of the business is up for sale.

Although revenue for the 12 months to 28 February 2022 increased year-on-year to £1.46 billion from £1.35 billion, expenses were also up. As a result, pre-tax losses widened to £86 million from £11 million. On top of that, TalkTalk’s net debt increased to £1.38 billion from £972 million at the end of February 2021. Its cash on hand stood at £20 million versus £34 million a year earlier.

The £200 million touted in the Sky News report would certainly help TalkTalk to shore up its balance sheet.

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