TalkTalk lost more than 100,000 customers after cyber attack

LONDON (Reuters) - A cyber attack on Britain's TalkTalk Telecom Group TALK.L in October cost the company as much as 80 million pounds but fewer customers than feared opted to end their subscriptions.

A spotlight shines on a company logo at a TalkTalk building in London, Britain October 23, 2015. REUTERS/Stefan Wermuth

Chief Executive Dido Harding went on television and radio in the days following the hack to warn the company’s 4 million customers that their financial data had been put at risk.

The numbers affected turned out to be far fewer, with limited data stolen from about 157,000 people, but the bad publicity did cause a spike in defections.

“We saw a big dip inevitably in early November and then the business started returning to normal through December and very much back to normal now,” Harding said on Tuesday.

Five young men aged between 15 and 20 were arrested and freed pending further inquiries, police investigating the attack said last year.

A total of 101,000 customers left -- less than 3 percent of the subscriber base. Bigger rivals Sky SKYB.L and BT BT.L benefitted from TalkTalk's problems, adding 144,000 and 130,000 broadband customers respectively in the last three months of 2015. TalkTalk shares, which have fallen as much as 36 percent since October, were trading up more than 10 percent at 240.7 pence at 1035 GMT.

Analysts at Jefferies, who rate TalkTalk “underperform”, said: “Bearing in mind the unprecedented bad publicity that the company faced and it need to withdraw from active marketing for a time, these results look less bad than could have been feared.”

The financial costs included a one-off 40 to 45 million pounds, and a 15 million pound impact on trading in the third quarter to end-December. There would also be 20 million pound hit from the reduced customer base in its final quarter.

Harding said she was ready to take advantage of any remedies imposed by European regulators vetting a deal to combine mobile operators O2, owned by Telefonica TEF.MC, and Hutchison's 0001.HK Three. TalkTalk has a wholesale agreement with O2.

“We think the Commision has two choices, either to block the deal outright or to create a fourth mobile operator,” she said.

“Should they choose to create a fourth mobile operator, yes we would be interested in looking at that.”

She declined to say if she would do a deal with a partner, such as France's Iliad ILD.PA, which is also reportedly interested in opportunities arising from the deal.

Editing by Kate Holton and Keith Weir