TalkTalk TalkTalk revenues down 3% in Q1, full year expectations unchanged
TalkTalk's revenues fell over 3% in Q1 2017, as a decline in consumer revenues offset what the company referred to as “strong growth” in its wholesale and corporate divisions. Around 20,000 customers were added during the quarter. The company said full-year expectations, which were scaled back in May, remain unchanged.

TalkTalk adds 20,000 customers during last quarter

TalkTalk has published its trading figures for the Q1 in the financial year 2017/2018 and they reveal some interesting purchasing decisions from the public.

The switch from losing customers to a net add of 20,000 in the quarter will make management at TalkTalk happy, but group revenue was down -3.2% so not everything is rosy just yet. TalkTalk has seen the anger caused by price rises in the landline and broadband marketplace and is trying to corner this price sensitive segment with its fixed price plans which are guaranteed no price rises during the minimum term, with people able to choose from 12/18 or 24 month plans. The operator now has some 1.3 million customers on one of these plans, which goes someway to explaining why churn is down, i.e. lots more people in a fixed term. The VDSL/FTTC/fibre take-up is apparently running at 40% of those on the fixed price contracts.

TalkTalk is of course bigger than just the retail face people are familiar with, it provides wholesale services to a number of other operators including Post Office and growth there may also be accounting for some of the turn around.

Looking at our speed test data for Q2/2017 which lines up with the Q1/2017 financial year, we saw 42% of TalkTalk tests on a VDSL2/FTTC based connection and 52% were on the entry level up to 38 Mbps download with up to 2 Mbps upload product. This is is lower than usual and is explained by some people opting for the Fibre Large service which offers the higher upload speeds of up to 19 Mbps (line length being the limiting factor on upload speed).

The fixed price contracts may as Ofcom mandate reduced prices for MPF (full LLU - most recent at start of July) and the GEA-FTTC 40/10 price reduction due in 2018 allow TalkTalk to enjoy a higher margin on a good number of customers. Price cuts are far from new for the line rental elements at the wholesale level but other costs such as billing/customer service/increasing bandwidth utilisation have seen a steady annual increase. 2018 may be when the fairly large drop in the 40/10 product price trigger real consumer level price cuts and this might also see TalkTalk switch to the 40/10 service for its entry level product.

TalkTalk customers in a fixed price plan can extend their contract and sign up for new price offers, so if prices do drop people can recontract and have the peace of mind of a fixed monthly bill.

One new element in the price rise game will be the ruling on surcharges for debit card and credit card payments, which while the headlines was all around booking flights does impact on some broadband customers, and what we'd expect is for operators across a range of industries to review the revenue levels and rather than some customers paying the extra fee, this revenue will be retrieved by everyone paying a little more and be hidden amongst annual inflation.

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