Carphone Warehouse and TalkTalk split

29 Mar 2010
TalkTalk

TalkTalk demerges from Carphone Warehouse, as ISP expresses fears over fibre broadband network

The Carphone Warehouse and its ISP TalkTalk will today complete a demerger.

It means the two businesses will be listed separately on the stock exchange and run as independent companies.

Carphone Warehouse will continue with its retail operations, which include a 50% stake in the European arm of electronics retailer Best Buy. The group is set to open a series of large consumer electronics stores across the UK and Europe.

TalkTalk last year completed the acquisition of Tiscali to become Britain's biggest domestic broadband provider. The company had previously acquired the UK arm of AOL.

The TalkTalk Group may elect to make capital investment in developing its own fibre network which could significantly impact the TalkTalk Group’s financial performance

Analysts claim the TalkTalk business was worth 60% of combined company, according to a report in the Financial Times. However, the demerger papers filed by TalkTalk admit there's a risk of the company losing value with the launch of high-speed fibre broadband networks in the UK.

"Uncertainty surrounding the building of and/or access to fibre networks, implemented by BT and others including the funding and price of using such a network, are risk factors for the TalkTalk Group," the report states.

"If access to the proposed fibre network is not available at a viable price, or with appropriate features, the TalkTalk Group may elect to make capital investment in developing its own fibre network which could significantly impact the TalkTalk Group’s financial performance."

TalkTalk is also concerned about its reliance on BT's wholelsale broadband network. "The nature of fixed-line broadband provision means that the TalkTalk Group is reliant on specific network infrastructure and access to local exchanges that are owned and controlled by BT," the company states. "The TalkTalk Group is active in taking measures to ensure the pricing of products and calls is set at a fair level and that the regulation and control of the network infrastructure is fair."

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