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TalkTalk has been late making payments worth millions of pounds to broadband suppliers BT Openreach and CityFibre in recent months, as the indebted telecoms provider struggles with cash flow issues in spite of a recent refinancing.
The Salford-based group has missed several deadlines this year to pay the two companies, whose broadband infrastructure it relies on, according to people familiar with the matter.
The delays come even after TalkTalk received a cash injection of £235mn from shareholders last year to help shore up its finances. The majority of the funding from investors — including TalkTalk’s executive chair Sir Charles Dunstone — was used to pay an outstanding bill with Openreach, its biggest supplier, while the rest was spent on restructuring fees, according to one of the people.
According to estimates from New Street Research, TalkTalk pays its broadband suppliers over £60mn each month. The late payments have varied in size, but amounted to a “small percentage” of the total figure, according to the person, who attributed the issue to cash flow problems. They added the bills had now been paid.
The delays come as TalkTalk is also currently locked in a contractual dispute with Sky over streaming service, NowTV, which the former company has previously offered to its television customers as part of a bundled package. TalkTalk is withholding millions of pounds from the media giant, according to two people familiar with the matter, in a spat first reported by The Telegraph.
The telecoms company has struggled since it was bought by Toscafund, a London-based hedge fund, in a £1.1bn leveraged buyout that added £527mn of debt to its balance sheet in 2021.
The company secured extensions to about £1.2bn of its existing debt as part of the refinancing completed in December. As part of that agreement, its bondholders can take control of the group unless it has at least £20mn in cash available at every quarter. New Street Research estimates the company had £42mn of cash available at the end of February.
TalkTalk reported last month that it had lost 400,000 customers last year, and cut its workforce by about 20 per cent. The company said more job cuts would follow this year, as it looked to streamline its business to better compete with alternative network providers, or “altnets”.
TalkTalk’s senior secured bonds have plunged in value since that report, from over 80 pence on the pound to 55 pence on the pound at the end of last week, as creditors have balked at its worsening performance. Meanwhile, its junior bonds fell from 28 pence on the pound to lower than 14 pence on the pound over the same period.
One former bondholder who dumped the debt last year told the Financial Times that TalkTalk was struggling to perform in a “super competitive” market with “altnets taking share”.
The company’s share of the UK broadband market has fallen to 11 per cent, from 14 per cent in 2022, according to research by Enders Analysis. In comparison, Altnets comprise 7 per cent of the market, up from 3 per cent over the same period.
A deal to sell part of TalkTalk to Australian investment group Macquarie was considered last year, while Virgin Media O2 submitted a bid for the company in 2022. No process to sell the business is currently ongoing, but a future sale is likely, according to two people familiar with the matter.
TalkTalk, Openreach, CityFibre, Macquarie and Sky declined to comment.
