BT reiterates outlook as strikes GBP400 million deal to save TalkTalk

BT Group PLC on Monday announced a deal to rescue TalkTalk Telecommunications Ltd and PlatformX Communications Ltd out of administration.

The London-based telecommunications firm said the total cash impact in financial 2027 arising from the deals will be around £400 million, comprising both consideration and other cash impacts.

After an unsuccessful sale process for TalkTalk's consumer and wholesale operations, BT said it had agreed the deal, "in the public interest, to protect customers and critical national infrastructure."

Shares in BT were up 1.7% at 199.70 pence each in London on Monday morning.

During the last 12 months, TalkTalk reported revenues of £1.2 billion and was loss-making, but BT said over a period of time the acquisition will become value accretive as the business is stabilised and synergies are realised.

TalkTalk sells home broadband and phone services in the UK and has 1.5 million retail customers and 1 million wholesale customers. PlatformX is a wholesale provider, supplying other telecom providers with internet connectivity services. It was formed from the combination of Virtual1 and TalkTalk's wholesale services and national network business. BT's Openreach is a network infrastructure supplier of TalkTalk.

BT expects a regulatory review of the transaction to take place over the coming weeks, pending which TalkTalk and BT will operate separately and continue to compete.

Last week, the Financial Times reported BT Chief Executive Allison Kirkby met with officials in the UK government's Department for Digital, Culture, Media & Sport to gauge whether a possible bid for TalkTalk would lead to a lengthy competition watchdog probe.

"Our immediate priority is to stabilise the business and provide a safety net for the households and businesses who rely on TalkTalk. Once the regulatory process has been concluded, TalkTalk's customers will benefit from access to the UK’s best network," said CEO Allison Kirkby on Monday.

"And, over a period of time, the transaction will create value for all our stakeholders – customers, colleagues, the country, and our owners," she added.

BT said Clive Selley will lead the stabilisation and integration planning of the acquisition. Martijn Blanken will take over Selley's role as chief executive of BT International, in addition to being CEO-designate of BT's proposed international joint venture with Verizon Communications Inc.

In addition, BT reconfirmed all FY27 and multi-year financial outlook metrics, including the inflection in normalised free cash flow to £2.0 billion in the current financial year, FY27, and to £3.0 billion by the end of the decade excluding the effects of this deal.

Specifically, for FY27 BT will report the acquired business as a separate reportable segment.

The estimate of the total cash impact of the acquisition in FY27 is £400 million, comprising consideration, transaction and administration costs, working capital impacts as well as a trading loss for the balance of this financial year of £60 million and non-receipt of £100 million otherwise due to Openreach.

Further details on the effects of the acquisition on revenue, earnings and capital expenditure will be provided later this financial year.

BT said it remains committed to its credit rating target and to grow its dividend by low to mid single digit percent per annum in financial 2027 and onwards until metrics consistent with a BBB+ credit rating are reached. Thereafter, residual cash flow will be available for enhanced distributions to shareholders.

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