TalkTalk sells Business Direct division to shareholders

TalkTalk has agreed to sell its business services division to a group of its own shareholders for £95 million, a move that effectively gets its separation plan underway.

The move also likely means that the company was unable to ink a deal with an established player in the market, despite having reportedly drawn interest from business communications provider Daisy Group and – more recently – Sky.

In the end, it was TalkTalk group’s shareholders that stepped up. The telco revealed that TFP Telecoms, a special purpose vehicle controlled by its main shareholders, have acquired TalkTalk Business Direct from the group. The deal comes with a long-term exclusive wholesale agreement with the group’s Wholesale Platform worth around £25 million over three years.

“The transaction delivers both investment for growth for Business Direct, as well as a long-term revenue agreement for our wholesale platform,” said outgoing TalkTalk CEO Tristia Harrison. “This is good news for customers and colleagues alike, and is an important first step in our demerger plans.”

TalkTalk formalised its much-discussed separation plan less than a week ago, sharing its intention to split into three operationally distinct entities – TalkTalk Consumer, the Wholesale Platform, and TalkTalk Business Direct – as of 1 November, followed by a legal split on 1 March. With the sale of TalkTalk Business Direct having been rumoured for a while, it was then only a matter of time before an announcement came.

In the end, the sale of the business raised less than media reports had suggested. When it reported Sky’s interest in the unit in August, the Sunday Times speculated on a £150 million price tag, but Sky News had previously plumped for a £200 million valuation.

It’s not really the case that the shareholders are getting a bargain though. Clearly, the group had little choice but to broker such a deal. After all, a sale to a third party would have been preferable given the company’s need to refinance debt. As such, this deal could well be a stop-gap measure, with the new owners continuing to shop window the B2B unit – and its near-90,000 small business customers, according to the separation announcement – in the hope of passing it on to a new buyer.

Meanwhile, we’re also keeping a close eye on the other two TalkTalk units, which might also be up for sale. TalkTalk Consumer has 2.4 million residential broadband customers and could be a useful scale-builder for one of the UK’s broadband players, for example.

Whatever the outcome, the sale of TalkTalk Business Direct marks the first real step in the UK telco’s separation plan. And there are likely many more to come, one way or another.

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