TalkTalk is cheap and cheerful as it shuns TV wars and looks to dividend

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TALKtalk Telecom will look to pay a special dividend as the cost of investing in its television service falls during a period of rapid customer growth, its chief executive said on Friday.

Dido Harding told a Morgan Stanley investor conference that she hoped to pay out excess cash to show her confidence in a group that is growing strongly and enjoying a slowdown in the rate of customers leaving the service.

“This is a highly cash generative business,” she said.

“It’s one of the reasons why we have grown our dividend in the first half by 15.9 per cent, even though we’ve been investing all this money in our TV business. As we come off the peak of subscriber acquisition costs investment it won’t be long before the balance sheet gets to that one times debt-to-EBITDA whereupon I think we will look forward to having a really good conversation with our shareholders on how best to return some of that excess cash.”

TalkTalk, which targets the budget market with packages of fixed-line broadband and telephony, a basic pay-TV service and mobile phones, reported results earlier this month showing the group snapping up new customers.

First-half earnings before interest, tax, depreciation and amortisation nearly halved to £76m due to the exceptional costs of its investing in its TV products, on revenue up 1.8 per cent at £843m, but the company has already committed to increasing the full-year dividend by at least 15 per cent.

Net debt was up 20 per cent on a year ago at £473m.

Ms Harding said at the time of results that the fight between bigger rivals BT and BSkyB to win sports fans had not really hurt demand for her lower-priced ‘value’ packages of broadband and TV as there was a clear market for people who don’t want to pay a premium for sports. BT recently paid an eye-watering £897m to outbid cable rivals for the 2015-18 Champions League rights.

“The truth of the matter is that our customers don’t save money by switching to BT for BT Sport,” she claimed.