TalkTalk shares plunge on fund raising and dividend cut

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TalkTalk also reduced its dividend for the second time in a year to fund its share of the investment in FTTP.

The company plans to build a fibre network that will supply high-speed broadband to three million homes and businesses.

Overall, the operator added 37,000 customers in the quarter, the highest number of net additions for nearly three years.

Infracapital will take an 80% slice of the new firm with a £400m investment while TalkTalk will own 20% after stumping up £100m.

Broadband provider TalkTalk has said that it intends to raise £200m through a share placement, in a move created to help it strengthen its balance sheet, support customer growth and build a full fibre network to service millions of homes across Britain.

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TalkTalk said its five-year project would target mid-sized cities and towns, such as York, the northern English city where it has built its first network.

The firm slashed its annual earnings outlook to between £230m (€260.65m) and £245m (€277.64m) from £270m (€305.97m) to £300m (€339.97m), sending shares sliding more than 14% during morning trading on the London Stock Exchange.

On the back of its investment plans, TalkTalk now expects underlying earnings of £230mln to £245mln, down from its previous guidance range of £270mln to £300mln, for the 2018 fiscal year.

"When we get to two times EBITDA (earnings before interest, tax, depreciation and amortization) cover to debt we'd look to normalise the dividend again, an estimate would be perhaps two to three years time", he said. The year before, it paid a final dividend of 10.58p and a total of 15.87p.

Jonathan Oxley, competition director at Ofcom, echoed the sentiments: "We welcome this latest announcement, which is another example of the real momentum behind full-fibre broadband".

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Infracapital has "extensive" experience in investing in full fibre broadband projects, TalkTalk said, having been involved in investments in Gigaclear and Wightfibre in the United Kingdom and Nexera, a joint venture with Nokia, in Poland. In Consumer, the total number of customers on fixed low price plans (FLPP) reached a total of 1.8 million in Q3, representing 61 percent of the retail base.

"It's 12 months since I announced my intention to take a more active role in the management of TalkTalk", Mr Dunstone said. TalkTalk posted a reduction in churn to 1.3% from 1.6%, and headline revenue growth of 1.0% year-on-year. Since then, we have reset the business and returned it to quarter-on-quarter customer growth.

"We will continue to make significant cost reductions as we radically simplify the business in line with the strategy we set out past year", she added.

"We said our priority for the year was growth and we are delivering it", said Tristia Harrison, chief executive of TalkTalk. We have therefore strengthened our balance sheet and temporarily reduced our dividend to take full advantage of the opportunities available.

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