BT Group (LSE:BT.A) announced it has acquired TalkTalk Telecommunications and PlatformX Communications out of the administration of TalkTalk Group on a debt-free basis.
The move comes after a prolonged but unsuccessful sale process for TalkTalk's consumer and wholesale operations, which BT said left the country, and particularly vulnerable customers and critical public services, at risk should the company collapse.
The acquisition protects continuity of service for TalkTalk's 1.5 million retail customers and 1 million wholesale customers, including vulnerable households and connections supporting critical national infrastructure across health, emergency services, defence, education, transport, banking and government.
TalkTalk reported revenues of approximately £1.2 billion over the last 12 months and was loss-making, BT said, adding that the business is expected to become value accretive over time as it is integrated and stabilised and synergies are realised.
"This is a genuinely unprecedented situation, where millions of citizens and businesses were at risk if TalkTalk had collapsed," said Allison Kirkby, chief executive of BT Group, adding that the deal was "the only viable option to keep millions of customers connected and supported".
BT estimates the total cash impact of the acquisition in the current financial year at approximately £400 million, comprising consideration, transaction and administration costs, working capital impacts, a trading loss for the remainder of the fiscal year of around £60 million, and the non-receipt of approximately £100 million otherwise due to Openreach.
The acquired business will be reported as a separate segment for the current financial year, with further detail on its effects on revenue, EBITDA and capital expenditure to follow once TalkTalk's financial reporting is aligned to BT's accounting policies and acquisition accounting is completed.
BT has reconfirmed all its financial outlook metrics for the current year and beyond excluding the effects of the transaction, including the inflection in normalised free cash flow to approximately £2 billion this financial year and to approximately £3 billion by the end of the decade.
Clive Selley CBE will lead the stabilisation and integration planning for the acquisition with immediate effect, while Martijn Blanken takes over as chief executive of BT International in addition to his role as chief executive-designate of BT's proposed international joint venture with Verizon.
A regulatory review of the transaction is expected over the coming weeks, during which TalkTalk and BT will continue to operate and compete separately.