TalkTalk encouraged by demand boost

TalkTalkTalkTalk has cheered investors by unveiling its best customer growth in two years in a sign the broadband and television firm is closer to putting its troubled past behind it.

The company was last year hit with a £3 million fine for shoddy service and was forced to pay out £2.5 million to customers who were billed despite cancelling their packages.
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But shares jumped around 10% after it revealed a net loss of 4,000 customers in the second quarter, compared to a net loss of 19,000 in the first quarter.

The improvement was driven by a 66,000 surge in customers on its more profitable fully unbundled network - lines using TalkTalk's own equipment in the local telephone exchange, which bypass BT.

Meanwhile, TalkTalk revealed a 4% rise in gross profit to £453 million in the six months to September 30, which does not include the £289 million invested in its television offering. Pre-tax profits, including TV investment, dipped 8% to £85 million in the period.

TalkTalk previously launched a TalkTalk Plus package, which offers customers a free YouView internet TV set top box, with a 12-month subscription to LOVEFiLM Instant and access to pay channels such as Sky Sports.

The group said it had started connecting customers at the end of September and has seen good demand through October with an installed base of 29,000 and connections running at 1,000 a day.

The launch was seen as a bid to take on rivals BT and Virgin Media, which have bolstered their services with acquired rights to Premiership football games and the recordable, on-demand TiVo service respectively. In August, the group launched TalkTalk Mobile, offering mobile-phone contracts across three different plans. The company added 32,000 customers in the quarter bringing the base to 117,000.

The group launched another cost-cutting drive in September which it expects to deliver savings of £30 million to £50 million over the next three to five years. Some of the steps taken include simplifying its IT outsourcing. Shares have climbed steadily from around 130p at the start of the year to 208p.

Edwin Lloyd, analyst at Edison Investment Research, said, "TalkTalk is tackling an overall backdrop of lower telephone usage by migrating its users on to its own network and using its balance sheet to differentiate itself from the competition by offering more value added services."
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