TalkTalk shares crashed 17% on Wednesday after a warning on profits that comes despite a surge in demand for its cheap TV, internet and phone deals. The challenger telecoms company embarked on an overhaul of its business last May, pledging to invest at the expense of profits, saying farewell to long-time chief executive Dido Harding and taking an axe to the dividend. With 30% shareholder Sir Charles Dunstone leading the shake-up alongside new boss Tristia Harrison, TalkTalk had promised to boost its sometimes shaky service and cut the market share of BT. Today’s half-year results showed some signs that this is working. The City was alarmed by the admission that the profits will be at the bottom end of expectations of £270 million to £300 million, and the shares got hammered. Later, they were down 20p, 10%, at 170p. In words that could be taken as direct criticism of Harding, Harrison (pictured) said the business had been “simplified and reset”. There has been a “turnaround from where we were 12 months ago”, she said. TalkTalk added 46,000 customers in the six months to September 30, compared with a loss of 29,000 last time. The half-year dividend of 2.5p is more than halved but is paid despite a loss of £75 million. Mike van Dulken at Accendo Markets said there was a “triple-whammy of bad news” in lower profits, an “unsightly loss” and a cut to the divi. “This is the last thing loyal shareholders will have wanted to hear,” he added. Customer churn is down from 1.5% to 1.3%, thanks to better service. Harrison thinks the “customer experience is much more stable” and people are flocking to its cheaper offer. “These are tough economic times. Customers do not want to be ripped off,” she said. “We have now delivered a third consecutive quarter of growth in our broadband base, with both retail and wholesale bases growing; returned to on-net revenue growth; and delivered lower churn than a year ago,” she added. Half-year sales slipped 5% to £856 million and the company has taken a £31 million restructuring hit for overhauling its mobile phones business. Barclays’ equity arm cut its price target for the shares from 215p to 200p. TalkTalk is working on building an internet network with an “ultrafibre” rollout in York in partnership with Sky and CityFibre. Sir Charles told the Standard: “If I were dictator of the country, I would cancel HS2 and put the money into broadband.” Nigel Langstaff, the former finance chief of Carphone Warehouse, founded by Dunstone, is joining the board. TalkTalk suffered a huge cyber hack in 2015, hitting 157,000 customers.
Shares in UK telecoms firm BT fell by more than 5 per cent after the company said it would not renew its contract with Google for access to Gmail and other services from next year. The company, which has been restructuring under executive chairman Sir Charles Dunstone and CEO Tristia Harrison, revealed half-year profits would be lower than expected at between £270m and £300m. However, TalkTalk added 46,000 customers during the six months to September, compared with losing 29,000 during the same period in 2016, while better customer service is credited with reducing churn from 1.5% to 1.3%.