Talktalk To Ponder on Toscafund’s Takeover Bid

Summary

  • The fourth-largest internet service provider of the UK said it has received a preliminary non-binding offer of 97 pence per share from Toscafund Asset Management LLP
  • Last year also, Toscafund had approached TalkTalk with a 135 pence-per-share offer which was rejected
  • TalkTalk has been valued at about 1.11 billion pounds. Shares of TalkTalk jumped by almost 18 per cent to 97.5 pence on announcement

The paradigm shift towards the work from home driven by the restrictions imposed during the lockdown has raised the demand for communication services. This demand isn’t expected to decline any time soon with the onset of the second wave of the coronavirus pandemic. An increasing number of people and companies are relying on home broadband for work as well as leisure. The way the wind is blowing, it has been clearly sensed by the private investors, and they are prepared to invest their money in this long-term trend. As per the latest growing list of inclination towards the European tele-communication companies, TalkTalk has attracted bids from private investors in recent times.

Shares of TalkTalk Telecom Group PLC (LON: TALK) jumped by almost 18 per cent to 97.5 pence on 8 October 2020, from around 83 pence before the announcement of the offer. The fourth largest internet service provider of the UK said it had received a preliminary non-binding offer of 97 pence per share from Toscafund Asset Management LLP (TAM) to take the company into private ownership. TalkTalk has been valued at about 1.11 billion pounds ($1.4 billion).

In a statement, TalkTalk’s general counsel and company secretary, Tim Morris said that the company’s management has considered the terms of the proposal and has also agreed to consider the same. Under the UK regulation, Toscafund is required to make a formal offer or drop the approach by 5 November 2020.

Last year also, Toscafund had approached TalkTalk with a 135 pence-per-share offer which had been rejected.

The London-based hedge fund, Toscafund Asset Management is the second-largest shareholder of Talk Talk, owning 29 per cent shares. Charles Dunstone, TalkTalk’s co-founder and chairman, owns 29.9 per cent shares, slightly more than TAM, remaining its single-biggest shareholder. Co-founder David Ross owns 11 per cent in the company.

 

About Talktalk

 

Based in Salford, United Kingdom, Talktalk Telecom Group PLC is a provider of fixed-line broadband, voice telephony, mobile and television services. Incorporated in 2009, the Company serves over 4.2 million residential and business customers under the TalkTalk and TalkTalk Business brands. 

In May 2015, TalkTalk’s shares price was at the peak when it was trading at more than £4.00 per share. However, it has been falling ever since then because of fierce competition, a data breach and profit warnings, washing away about three-quarters off the value.

To weather the economic pressure created from measures adopted to limit the pandemic, the telecom company has been focusing on offering low-cost connections. It has been struggling since the last four or five years to grow its subscribers, but now they are getting a business that’s got a decent niche at the low end of the market.

Must Read: Performance Review of Two Telecom Stocks: BT Group PLC & TalkTalk Telecom Group PLC

 

Financial Highlights

 

TalkTalk Telecom Group Plc had released its trading update for the Q1 FY21 in the month of July in which the company’s headline revenue (excluding Carrier and Off-net) was recorded as £358 million as compared to £387 million in Q1 FY20. The contraction in the revenue was mainly due to Covid-19 impact after the trading restrictions and cancellation of live sports and ongoing industry-wide declines in Voice usage aggravated by the lockdown.

Also Read: TalkTalk Telecom Group Plc reports revenue of £1,518 million for FY20

 

Stock Performance

 

The stock of TALK was trading at GBX 98.90 on 9 October 2020 at 1:24 PM, up by 1.44 per cent from its previous close of 97.50. The stock’s 52-week low/high price range was recorded as GBX 69.50/122.10. The telecom’s total outstanding market capitalisation stood at £1,117.61 million. TALK’s shares delivered a price return of -17.37 per cent since 1 January 2020 till date.

 

The Growing Resilience of Telecom Industry

 

In the unprecedented prevalent crisis induced by the novel coronavirus, the technology infrastructure has played a vital role. The need and reliance on the network providers have gone up manifolds with work from home becoming a ubiquitous phenomenon in the service industry. While various UK’s domestic businesses focused upon reducing costs and ensuring liquidity, some of them focused on improving the already existing business models to the online platforms.

The demand for the data services have been pushed up by home entertainment, online classes, and remote working is a regular feature during the lockdown, according to the regulator of the telecommunication sector, Ofcom. An increase in daily throughput by 60 per cent has been reported by some broadband providers. 

Along with the global telecom industry, the UK is also migrating towards 5G network. The telecom industry of the UK is highly regulated by major comprises such as Vodafone Group, BT Group, EE, O2, Virgin Media, etc.

Let’s focus on the stock performances of some of the LSE-listed telecom companies of the UK.

BT Group PLC (LON: BT.A)

The stock of BT was trading at GBX 107.60 on 9 October 2020 at 1:45 PM, up by 0.99 per cent from its previous close of GBX 106.55. The stock’s 52-week low/high price range was recorded as GBX 97.86/209.20. The telecom’s total outstanding market capitalisation stood at £10,566.58 million. BT’s shares delivered a price return of -45.65 per cent since 1 January 2020 till date.

Vodafone Group PLC (LON: VOD)

The stock of VOD was trading at GBX 111.64 on 9 October 2020 at 1:48 PM, up by 0.38 per cent from its previous close of GBX 111.22. The stock’s 52-week low/high price range was recorded as GBX 98.02/165.24. The telecom’s total outstanding market capitalisation stood at £29,842.43 million. VOD’s shares delivered a price return of -24.75 per cent since 1 January 2020 till date.

To Know More, Do Read: BT Increases Tariff Amidst A Boom in Demand, Vodafone And TalkTalk Follow the Trend

 

 

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