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LONDON (Alliance News) - TalkTalk Telecom Group PLC is the biggest faller in the FTSE 250 Wednesday despite reiterating its guidance for its current financial year, as it posted a slowdown in revenue growth for its quarter and warned on softness in the broadband market.
The telecommunications company said the broadband market was softer in its first quarter to end-June than it has been in previous quarters as a result of "higher promotional activity" in the sector. Competition is increasing in the telecommunications market as providers continually work towards becoming 'quad play' providers - meaning they provide fixed-line voice, broadband, mobile and television services - in an effort to hold on to customers.
TalkTalk posted revenue growth of 3.5% for its first quarter - slowed from the 6.0% growth it posted in the fourth quarter of the previous year.
TalkTalk said 6.5% growth in on-net revenue - meaning customers connected directly using TalkTalk's own equipment - and 4.9% growth in corporate revenue helped offset the continuing decline in off-net revenue - meaning customers whose connection is provided via BT Group PLC's wholesale business. It said off-net revenue declined by 47% in the quarter from a year ago.
Revenue generating units per customer from TalkTalk's on-net customer base grew 15%, the company said, to 1.6 from 1.4 a year ago.
Growth in TalkTalk's mobile segment has been boosted by the launch of its unlimited SIM product at the beginning of the quarter, and the company said its share of the UK SIM-only market was 15% in the quarter, compared to 11% in the fourth quarter of the previous year.
The migration of Tesco PLC's broadband customers onto TalkTalk's network has begun well, and it said it expects to complete this migration during the remainder of the year. Towards the end of June, TalkTalk announced packages for its new fibre-to-the-premise network in York, which is a joint venture with Sky PLC and CityFibre Infrastructure Holdings PLC, and it expects its first customers to be connected to the network in Autumn.
Customer churn was stable during the quarter compared to the previous year.
TalkTalk expects to announce its first-half results on November 10. It said it expects earnings before interest, tax, depreciation and amortisation to be weighted towards its second half.
Nomura reiterated its Reduce rating on TalkTalk as its first quarter revenue growth fell short of Nomura's expectations of 6.5%. The broker said it continues to believe the company is "running short of time to optimise its margins before structurally lower profitability takes hold in a superfast broadband world."
Shares in TalkTalk are trading down 8.8% at 356.50 pence Tuesday morning.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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