Sir Charles Dunstone injects £65 million to save TalkTalk from collapse

TalkTalk narrowly avoided collapse and secured an emergency lifeline for its billionaire founder Sir Charles Dunstone.

Along with other shareholders, Dunstone has agreed to inject £65 million into the struggling broadband sector, a move crucial to sidestep a looming debt crisis.

This initial capital injection will be supplemented by a further £170 million, with assets such as the Virtual1 subsidiary and internet brands Ovo and Shell being integrated into the group to strengthen its financial position.

The refinancing package, which totals more than £400 million, also includes participation from major shareholders Toscafund and Ares Management. In return, lenders and bondholders have agreed to extend the debt maturities from their original deadlines in November 2024 and February 2025 to September 2027.

In a statement, TalkTalk said: “The proposed transaction will leave the company well-funded to execute PlatformX Communications and TalkTalk’s respective strategic plans, while continuing to capitalize on their strong positions in the market.”

The bailout provides a crucial reprieve for the company, which recently warned it was on the brink of collapse under a £1 billion debt burden.

The broadband provider, which serves 3.6 million UK customers, was in talks to sell a stake in its wholesale division PlatformX to Australian investor Macquarie for up to £500 million. However, negotiations failed, resulting in Sir Charles injecting his own capital into the company.

Earlier this year, TalkTalk divested its corporate division for £95m to a consortium of existing shareholders and is currently exploring the potential sale of its consumer business as part of a wider restructuring strategy.

The company’s financial problems have been exacerbated by weak trading performance amid soaring inflation and fierce competition. Last year TalkTalk lost 334,000 customers, with pre-tax losses increasing from £70m to £127m.

Regulator Ofcom has taken note of TalkTalk’s precarious situation and has initiated plans for a ‘supplier of last resort’ regime to protect customers. Meanwhile, bigger rivals including Virgin Media O2 – which held preliminary talks with TalkTalk earlier this year – continue to monitor the situation closely.

This episode marks a rare setback for Sir Charles, the serial entrepreneur who also founded Carphone Warehouse. Three years ago he took TalkTalk private in a £1.1 billion debt-funded deal.

In a major leadership change, TalkTalk confirmed that Dame Tristia Harrison will step down as Chief Executive next month. She will be succeeded by James Smith, the current chief financial officer, while Sir Charles Dunstone will remain chairman.