BT agrees rescue deal to buy broadband operator TalkTalk
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Mitchell LabiakBusiness reporter
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The UK's biggest broadband provider, BT, has agreed to buy rival operator TalkTalk to save the company from collapse .
The takeover would end of months of speculation over the future of TalkTalk and mean services for its millions of customers will continue as normal.
BT chief executive Alison Kirkby said it provided "a safety net" for those who rely on TalkTalk. The administrator, Alvarez & Marsal, said it also provided certainty for TalkTalk's 900 staff.
However, Virgin Media called the deal a "stitch up" which allows BT to "tighten its grip" over the market. The government has given itself the power to have the final say on the takeover, citing its importance to critical public services.
TalkTalk has 1.5 million retail customers and one million wholesale customers across the UK.
BT's Kirkby told the BBC's Today programme: "Two and a half million customers, including vulnerable households, and key emergency services might have lost their services if Talk Talk had failed, which it was on track to do.
"So BT stepped in as we were the only viable option to take the business forward."
Ernest Doku from comparison website Uswitch said the deal means "nothing changes today".
"Your broadband and landline carry on as normal, and there is nothing you need to do right now," he added.
However, he said that BT should explain "quickly and plainly what this means for contracts, prices and service in the future, so nobody is left guessing".
The regulator, Ofcom, says broadband customers should have the right to leave a contract without an exit fee if a new owner puts the price up beyond what was in the contract.
TalkTalk began as a challenger to BT in the broadband market. It was listed on the London Stock Exchange, but was taken over by private equity in 2021.
Since then, the firm has built up debt while losing customers, leaving it unable to pay some of those it owes money to.
Despite this, TalkTalk remained the fourth biggest broadband provider in the UK, with 6.6% of customers, during the March to June period of this year, according to figures from analytic firm Opensignal.
BT has 32.5% of customers, Sky 19.9%, and Virgin Media 19.1%.
Rivals who were beaten to the deal by BT have said it will be bad for consumers.
Tom O'Hagan, a former TalkTalk executive who was leading a takeover bid for the firm, told the BBC he was worried about "reduced choice and potentially an increase in price for consumers and for businesses" because of the BT deal.
He added that he was particularly concerned about competition in the wholesale market, where TalkTalk's subsidiary PXC was BT's main rival.
Virgin Media, which has also reportedly tried to buy TalkTalk in the past, said the BT takeover has "all the characteristics of a stitch up masked as a rescue deal in the public interest".
It added that the purchase means BT can "roll its tanks over competition and further tighten its grip on the market. The logic simply doesn't add up."
How to change broadband contracts
A step-by-step guide to the One Touch Switch process
What is One Touch Switch?
One Touch Switch is a scheme introduced by internet regulator Ofcom to make it easier for people to change their broadband and landline provider.
It means customers only have to contact their new provider, rather than manage both sides.
Here’s how it works…
Choose a new broadband deal
Ofcom has a dedicated page to help people understand the ins and outs of what to consider when choosing a broadband or landline provider.
Once you know what you’re looking for, the regulator also has a list of approved price comparison sites which can help you check the differences between the companies competing to serve you.
Look around for the best deal that fits your needs, such as internet speed, cost, and any additional benefits.
New provider passes on details
Once you’ve chosen your new provider and told them you want to change, they will take on the responsibility of making the switch.
You’ll need to agree the new terms with them and give them the details of your current deal, but they will contact your current provider.
Receive final details
You will receive final details from the provider you’re leaving, such as:
-
a final bill
-
any cancellation fees for leaving early
-
what to do with your router or other equipment
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a final contract date
Proceed with the switch
If you’re happy with the terms then you can give permission to your new provider to proceed with the switch and they will do the work for you.
If you’re not happy with any of the final details, then you don’t have to change. It’s up to you.
Your connection is switched
Your new provider will send you all the information you need to become one of their customers and make the switch for you.
The only exception is if you’re switching to or from a mobile broadband service, such as one that uses 4G or 5G routers. It’s fixed-line broadband only.
The Competition Markets Authority (CMA) will need to approve the takeover, which would give BT greater power over the broadband market.
Tom Smith, a competition lawyer and former legal director at the CMA, said the regulator will be balancing that concern with other considerations.
"When the CMA looks at it, it will look at what would have happened if the deal wasn't going through," he told the BBC.
"If TalkTalk would have exited the market, for example, then really any deal is better than TalkTalk exiting, but then there might be alternative bidders as well that would have been less anticompetitive."
However, the Department of Culture, Media, and Sport (DCMS) has given itself the power to make the final decision on the deal in the name of the public interest once the CMA has made its report.
DCMS has given the CMA until 19 October to deliver its verdict.
Culture Secretary Lisa Nandy said: "Phone and broadband services are vital national infrastructure.
"If TalkTalk services fail, there is a genuine risk to life and public services – including to hospitals, schools and emergency care. These are unprecedented circumstances that require action now."
BT has said it welcomed the intervention and would "work constructively with the government and the CMA during their review".
Judith Mackenzie, a partner at investment manager Downing, told the BBC that broadband was "not a regulated industry, unlike electricity and water, but it's also very important to business users and ourselves, consumers".
"It's almost like a commodity now, broadband," she added.
BT has said it will cost the firm £400m to buy TalkTalk out of administration.
This includes the purchase price, fees, TalkTalk's expected £60m loss for this year, and BT effectively writing off the £100m TalkTalk owes BT's Openreach business.
TalkTalk has £1.5bn of debt and made a £100m loss last year.
Virgin Media fined after hanging up on customers trying to cancel contracts
