TalkTalk was quick to praise the success of its new quad-play strategy after reporting year-on-year revenue growth of 4.2 per cent in its financial third quarter (calendar Q4), but the UK-based operator also indicated that the cost of acquiring new subscribers for combinations of its mobile, broadband and TV products would hit earnings in the full year.
While reporting its "strongest growth ever in aggregate take-up of new products TV, mobile and fibre", CEO Dido Harding said costs were not falling fast as expected, with the miss on cost savings around £10 million (€13 million/$15 million) to £15 million.
"The customer experience is improving, and you see that with churn at 1.3 per cent being the lowest we've reported, but the associated cost savings are taking longer to come out," Harding said, Reuters reported.
TalkTalk noted in its guidance for the full financial year that EBITDA is expected to be towards the lower end of market expectations. The company maintained its medium-term EBITDA margin target at 25 per cent.
The company said revenue in the third quarter of its current financial year (to the end of March) reached £449 million and is on track to rise by at least 4 per cent in the full year.
Take-up was impressive, with 50,000 mobile adds in the financial third quarter. This means that TalkTalk Mobile took 11 per cent of the total UK SIM market in the month of December, "ahead of Vodafone and Tesco Mobile", with about 10 per cent of its customers now also subscribing to mobile services.
TalkTalk also added 115,000 new TV customers and 88,000 new fibre customers in the quarter, and said the number of overall broadband customers increased by 15,000.
"Today's results demonstrate the strong and growing demand for our value-for-money products, as we saw our strongest ever quarter of TV, mobile and fibre adds with our lowest ever reported churn. We are excited about the future of quad-play," Harding said.
TalkTalk last year formed a multi-year mobile virtual network operator (MVNO) agreement with O2 UK to boost its quad-play or multi-play strategy--which refers to the process of bundling a number of different services together into a single package.
The company is following a similar strategy to UK rivals BT, Sky and Virgin Media by adding mobile services to its mix of fixed and TV products, although BT plans to buy the EE mobile network rather than rely on an MVNO and a small cell network.
Mobile operators have also been considering their options, with latest reports suggesting that Vodafone UK is close to stepping up its own challenge in the multi-play market. According to the Financial Times, the company will reveal plans in the coming weeks for a push into the UK consumer broadband market using BT's Openreach facilities. Vodafone already owns a large national fibre network after buying Cable & Wireless Worldwide in 2011, but has so far used the network for its business customers.
Meanwhile O2 UK and Three UK remain locked in merger discussions, and show little sign of joining the multi-play market. Indeed, Three UK CEO David Dyson this week questioned whether there is a consumer appetite for quad-play services in the UK, telling the FT that the "jury was still out" on whether consumers want to buy all their services from a single provider.
According to a recent survey of 1,000 UK users by CCS Insight, people's appetite for multi-play services increases as they own more devices. The research company noted that most users who have signed up to a multi-play package own more than three connected devices. It added that more than four in 10 people who do not have a multi-play bundle would consider signing up to one.
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