ICSM Business News: potential broadband provider crisis as BT absorbs insolvent Talk Talk to save a customer meltdown and 900 jobs
By Harry Mottram: Broadband provider Talk Talk is to be taken over by telecommunications giant BT in a £400m pre-pack deal after it fell into administration on October 5th. The acquisition has been given the blessing by the Government to protect the two and half million Talk Talk customers from losing connectivity along with the 900 staff, various contractors and the firm’s subsidiaries. The decision hasn’t gone down well with rival Internet Service Provider Virgin Media 02. Their CEO Lutz Schùˆler said: “Protecting customers does not, in our view, require Government to predetermine who should ultimately own TalkTalk's consumer and wholesale businesses; credible alternative arrangements should be fully explored.”
Back in the pre privatisation era when the Post Office ran the telecommunications sector
In the pre-internet era British Telecoms was separated from the Post Office in the 1970s, rebranded as BT and privatised in the 80s before full privatisation in the 1990s and 2000s. There was a proliferation of independent telephone companies all grabbing a share of what had been initially a state monopoly. The Credit Crunch of 2008 triggered by the sub-prime scandal in the USA saw some of these new independents collapse and merge. Now there is an accepted wisdom in the industry that there could be a new wave of mergers.
Ian Carrotte of ICSM
Ian Carrotte of ICSM said that Talk Talk was struggling due to having accrued £3.3bn in debt making it unviable. He said the main concern was for the creditors as the pre-pack would effectively make Talk Talk debt free as it was absorbed into BT. He said that ICSM understands that the deal used a ‘hive down’ – essentially Talk Talk’s retail and wholesale outlets were moved to new companies which BT bought meaning that BT didn’t get lumbered with the Talk Talk debts.
The creditors include Ares Management who will lose around £500m, KKR will lose £60 and various bondholders and Asset Management outfits will see around £685m gone west while Openreach – the BT subsidiary – have written off £100m.
There has been much talk in business circles about a potential AI Bubble creating another Credit Crunch forcing banks and lenders to call in loans. When that happens the whole pack of cards begins to collapse – but economies have proved to be more resilient than in the past as has been proved by the unresolved oil crisis due to the Iran-USA war. But there is likely to be a shakedown of broadband providers since Talk Talk were number four in the UK behind BT, Virgin Media O2 and Sky Broadband, but ahead of Vodaphone.
How it once was at a telephone exchange: The photo is a still from a film on the Computer History Archives Project which has a channel on YouTube
Previously Tak Talk had acquired Tiscali, AOL, Tesco Broadband, Origin and SSE – while BT owns Plusnet, EE and Openreach – which legally must power broadband for other competing providers like Sky and Vodaphone.
Ian Carrotte of ICSM in Somerset, said it reminded him of when a number of energy firms collapsed and were taken over by the ‘Big Four’ in 2021-2022. Then there was a huge market shrinkage with 70 energy firms reduced to 17. Whether that happens this time we must wait and see he said – but there are serious questions to be asked about how the privatised sectors operate which has seen a debt free state monopoly split into many operators who have run up eye-wateringly high debts – only to be bailed out by their rivals - and their creditors having their fingers burnt.
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