UPDATE 1-Demand for TV boosts TalkTalk full-year results

Thu May 15, 2014 4:25am EDT

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LONDON May 15 (Reuters) - Telecoms group TalkTalk has signed up more than 1 million customers to its TV service, making it the fastest growing TV business in Britain and boosting full-year revenue.

The company, which is targeting those customers who want a cheaper TV offering with the ability to record programmes and take some additional channels, said the solid performance put it on track to hit its medium term profitability targets as it recovers from a period of investment.

TalkTalk launched its TV offering over 18 months ago, competing with established players BSkyB and Virgin Media, and a revitalised offer from BT.

It reported results on Thursday with revenue up 3.4 percent to 1.7 billion pounds ($2.9 billion) for the 12 months to March 31, in line with forecasts and its first full-year of revenue growth since it demerged from Carphone Warehouse in 2010.

Headline core earnings were down 27 percent but the group said its earnings margin improved throughout the year to 12.3 percent. Increased cost savings meant TalkTalk expects the margin to improve further, to 25 percent, by full-year 2017.

Analysts said the results were in line with forecasts but noted that the addition of TV customers had been slightly slower than expected in the fourth quarter. The TV offering is designed to boost the average amount each customer pays and improve customer loyalty, or churn.

"Looking ahead, more muted TV growth has implications for how low churn can reach," analysts at Jefferies said. "(That) leaves TalkTalk more reliant on pricing and overhead reduction to achieve (and sustain) challenging margin targets."

Having used BT to develop most of its broadband network, TalkTalk has started working with BSkyB to build their own fibre network in York, northern England, to deliver the fastest broadband speeds available by sidestepping the BT network they rely on elsewhere.

TalkTalk CEO Dido Harding told reporters the project in York was designed as a trial to gauge customer demand for superfast broadband and that it would look to repeat this in other, similar sized cities if it worked well.

($1 = 0.5960 British Pounds) (Reporting by Kate Holton; editing by Sarah Young)

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