BT agrees rescue deal to save TalkTalk from administration

BT Group has agreed a rescue deal to buy TalkTalk’s consumer and wholesale businesses out of administration in a move protecting around 900 jobs and telecoms supply to millions of customers and vital public services.

The telecoms giant said it had stepped in to save TalkTalk and its PlatformX Communications (PXC) business from collapse in a “genuinely unprecedented situation”.

It comes as the Government said it has taken urgent action to intervene and help pave the way for a sale to BT after TalkTalk’s attempts to find a buyer for its two businesses had failed.

BT said the deal – which is costing it around £400 million in total – will “protect continuity of service for its 2.5 million customers, avoiding the risk of material harm to vulnerable customers and key emergency services”.

TalkTalk has 2.5 million customers (PA)

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TalkTalk’s customers include vulnerable households, as well as connections that support critical national infrastructure providers across health, emergency services, defence, education, transport, banking and government.

Administrators at Alvarez & Marsal Europe said the sale will see all 900 employees at TalkTalk’s consumer and broadband business and PXC transfer to BT as part of the deal.

The Public Interest Intervention Notice issued by the Government will allow it to consider the wider public interest of the deal once the Competition and Markets Authority (CMA) has reported back on any competition concerns.

Lisa Nandy, Secretary of State for Digital, Culture, Media and Sport, 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.

“That is why I am acting with urgency to ensure that impacts on public health, critical national infrastructure and supply to vulnerable customers are fully considered as part of this process.”

Digital, Culture, Media and Sport Secretary Lisa Nandy said immediate action is required (PA)

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The CMA has been asked to report back to Ms Nandy by October 19, after which she will make the decision on whether to rubber stamp the deal.

TalkTalk’s customers do not need to take any action following this deal, the Government stressed.

Allison Kirkby, chief executive of BT Group, said: “This is a genuinely unprecedented situation, where millions of citizens and businesses were at risk if TalkTalk had collapsed.”

She added: “Our immediate priority is to stabilise the business and provide a safety net for the households and businesses who rely on TalkTalk.

“Once the regulatory process has been concluded, TalkTalk’s customers will benefit from access to the UK’s best network, and the full range of market-leading products and services that BT offers.

“And, over a period of time, the transaction will create value for all our stakeholders – customers, colleagues, the country, and our owners.”

BT said it paid around £400 million in total for TalkTalk, including transaction costs.

It is thought BT agreed to pay around £100 million to TalkTalk’s majority shareholder and creditor Ares Management under the deal, with a further £60 million to private equity giant KKR, which acts as securitisation agent.

But creditors are said to be left owed hundreds of millions of pounds as a result of the failure of debt-laden TalkTalk due to the so-called pre-pack administration.

TalkTalk was founded by Sir Charles in 2003 as a subsidiary to Carphone Warehouse.

Telecoms watchdog Ofcom said it would watch the sale to BT and integration of TalkTalk “closely”.

Dame Melanie Dawes, Ofcom’s chief executive, said: “The transaction will now be subject to the appropriate clearances and we’ll be working closely with the Government and the CMA during that process.

“Existing regulatory obligations will continue to apply.

“We’ll keep a close eye on the transition to protect consumers and competition, and we have written to BT today to underline our expectations.”