TalkTalk to buy rival SSE Phone & Broadband

TalkTalk has brokered a deal to acquire SSE Phone & Broadband from Ovo Energy, a move that could add around 100,000 customers to its portfolio.

The companies have not shared a valuation for the deal, but it’s not likely to be huge; Ovo acquired SSE Energy Services Group, of which the broadband business forms a small part, two and a half years ago for £500 million. But the deal is interesting because the acquirer is itself the subject of endless M&A speculation in the UK.

TalkTalk simply said that it has entered into an agreement with Ovo Energy that will see all the SSE Phone & Broadband customers and staff transfer to TalkTalk from autumn this year, when it expects the deal to close. It did not comment on what sort of numbers we’re talking about, but according to the Telegraph, which rumoured the deal earlier this year, SSE Phone & Broadband has a customer base of around 100,000.

The deal makes sense for both parties. Ovo Energy notes that it will enable it to focus on its core energy business – to say that’s a challenging place to be at present is something of an understatement. Meanwhile, for TalkTalk, it’s about building some scale.

“We’ll be moving your service to TalkTalk’s network over the next few months. But you’ll stay on the same package and won’t experience any issues,” Ovo Energy assured its SSE Phone & Broadband customers in a statement.

A couple of things to unpick there. First the network. TalkTalk says it serves 4.2 million customers with fixed broadband, mobile and TV services, including 2.4 million fibre customers, via 3,000 unbundled exchanges. SSE Phone & Broadband currently uses Vodafone as its network provider, a snippet of information that is carefully buried in the Ts and Cs on its website. Both are CityFibre customers, among other providers, so there might not be much change for SSE users, depending on location.

Secondly, Ovo’s pledge that customers won’t experience any issues is pretty brave considering TalkTalk’s less-than-stellar reputation for customer care. But with the deal including the right for TalkTalk to retain the SSE Phone & Broadband name until April 2023 “to support a smooth transition,” customers won’t necessarily know how to apportion blame… should it be necessary.

That’s presuming TalkTalk is still a standalone entity by then, of course.

The latest major rumour about its future came less than a month ago when Virgin Media O2 reportedly tabled a £3 billion bid for the telco. The information came from Sky News, which had reported earlier this year that Vodafone and Sky had both made offers of a similar magnitude. None of the parties involved – or allegedly involved – have made any formal comment on the matter, but working on the assumption of ‘no smoke without fire,’ coupled with the fact that a takeover does seem like the most likely result for TalkTalk as the UK’s big guns scale up, we can probably expect an announcement in the not-too-distant future.

The £3 billion being bandied about is a pretty hefty price tag, so it could be that valuation is proving a sticking point if any talks are indeed ongoing.

TalkTalk isn’t paying anything close to that for SSE Phone & Broadband, but it’s still a useful deal and one that will require its close attention when it comes to the smooth transfer of customers.

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