November 21, 2018 / 7:26 AM / 22 days ago

UK's TalkTalk sets out new plan to build own fiber network

LONDON (Reuters) - TalkTalk (TALK.L) said it would connect 60,000 more homes in northern England with fiber, underlining its ambition to build its own ultrafast network reaching three million customers after it abandoned an earlier plan to team up with M&G Prudential.

FILE PHOTO: A woman speaks on her phone as she passes a branded logo outside the Talktalk headquarters in London, Britain May 10, 2017. REUTERS/Neil Hall

The British broadband firm launched its new network company ‘FibreNation’ as it reported a 35 percent rise in first-half earnings to 101 million pounds ($129 million), helped by a recovery in customer numbers and better prices for the fiber connections it buys.

It said it was talking to potential investors, including M&G Prudential-owned Infracapital, on FibreNation’s capital structure. TalkTalk is itself funding the rollout to the Yorkshire towns Harrogate, Ripon and Knaresborough.

Company founder and chairman, Charles Dunstone, said Infracapital’s deal to buy rural provider Gigaclear earlier this year caused TalkTalk to reassess the terms of its own agreement.

“We reflected we were doing all the work and we’ve got the customer base that makes it work because we have the customers to migrate,” he said. “I thought we might be selling ourselves short.”

Rival Sky has partnered TalkTalk in a trial network in York, and the two groups will continue to have wholesale access to the expanded footprint.

Britain has set an ambitious target to connect 15 million homes and businesses to full fiber by 2025, and companies such as BT (BT.L) and Vodafone (VOD.L) have announced plans.

Shares in TalkTalk, which have declined 25 percent in the last 12 months, gave up initial gains to trade down 6 percent at 115 pence by 1026 GMT on Wednesday.

Analysts at Jefferies, who rate TalkTalk ‘underperform’, said a decline in average revenue per user was disappointing.

Chief Executive Tristia Harrison is working to improve TalkTalk’s performance by re-establishing its value credentials with long-term fixed-price broadband offers.

She said the company made good progress in the first half, with 24,000 net customer additions in its second quarter taking its base to 4.2 million, and churn, or the number of customers leaving, falling to a record low of 1.1 percent in the quarter.

“Earnings are where they need to be in H1,” she said. “That is underpinned by a bigger base (and) we are starting to see an improvement in ARPU (average revenue per user).”

She said the company had been helped by price changes and volume discounts from national network provider BT’s Openreach.

It also plans to save money by moving its headquarters from London, where it employs nearly 500, to Salford, northern England.

Editing by Kate Holton and Adrian Croft

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