Anyone remember Leon Jackson and Joe McElderry? Thought not. One-time winners of The X Factor, they have faded into obscurity, along with the TV talent show’s ratings.
TalkTalk, the show’s sponsor for a decade, knows a lot about faded glory. (enough to ditch its X Factor sponsorship late last year). The telecoms provider’s share price has followed a similar trajectory to the TV show’s ratings.
TalkTalk has never recovered from a cyber-attack in 2015, one that exposed the personal details of 157,000 customers. Yet its problems go far beyond this.
It has been haemorrhaging customers for the past four years. Its share of the retail broadband market has dropped from 16% to 12%, as it has lost about 500,000 customers — or nearly 15% of its base — according to research from Enders Analysis. Despite its no-frills image, TalkTalk has failed to inspire.
In February its founder, Sir Charles Dunstone, decided enough was enough. Chief executive Dido Harding went and Dunstone took the reins as executive chairman.
Dunstone faces a thankless task. Last week the fanatical yachtie was even tweeting upset customers while in Bermuda watching the America’s Cup.
Much has changed in telecoms since TalkTalk was spun out of Carphone Warehouse in 2010. Rivals BT and Sky are investing heavily in content, going head to head in a price war over football rights. Virgin Media is splurging on its fibre optics roll-out. Households want reliable and multi-faceted telecoms services that span broadband and mobile and link the ever-increasing array of connected devices in the home. With £782m of debt, versus a £1.7bn valuation, TalkTalk does not have the funds to compete.
Dunstone reckons he has a plan to get TalkTalk singing again. He has slashed the dividend (which has come at considerable personal cost as he has a 31% stake).
A dash for growth is top of his list, fuelled by a marketing spree. There are encouraging signs, such as a rare increase in broadband customers in the first quarter. But TalkTalk’s mobile ambitions have been scaled back.
A slow, bruising slog is ahead. Distant hope lies in a takeover, perhaps by the likes of Telefonica, but who would bid for the business today?
That might be a more realistic prospect when Dunstone has restored its reputation, but that’s likely to require a lot of patience.
Dunstone’s nostalgia trip requires a strong stomach. Avoid.
