Target: TalkTalk’s current chief executive Tristia Harrison
Vodafone is circling rival TalkTalk over a possible megamerger that would create waves across the telecoms sector.
The owners of TalkTalk, one of the UK’s biggest broadband providers, have hired bankers to sound out a possible sale that values the company at £3billion.
A tie-up between the two would be the latest blockbuster merger attempt this year, coming nearly three months after it was revealed that Unilever had tried to buy GlaxoSmithKline’s consumer healthcare division.
The move takes place one year after TalkTalk was taken private in a £2billion deal spearheaded by hedge fund Toscafund, run by pro-Brexit Tory donor Martin Hughes.
TalkTalk had previously been listed on the FTSE 250.
Hughes is known as ‘the Rottweiler’ in City circles because of his aggressive style when agitating for change at firms he invests in.
Talk Talk’s long-time adviser, investment bank Lazard, is fielding approaches and searching for potential buyers although no formal offers have yet been received, according to Sky News.
Aside from Vodafone, another possible buyer is understood to be Sky, which is owned by US media giant Comcast. TalkTalk and Vodafone declined to comment. TalkTalk has around 4.2m customers and 2.4m fibre broadband connections across the UK as well as a pay-TV service that includes channels from both Sky and BT Sport.
The firm was co-founded in 2003 by Sir Charles Dunstone and was originally part of retail chain Carphone Warehouse before being demerged in 2010 to become a standalone company.
TalkTalk has been a lucrative business for the 57-year old, who according to Forbes has a fortune totalling around £769m.
He took over as chairman in 2017 after then-chief executive Dido Harding resigned following a massive cyber-attack that affected tens of thousands of its customers.
She would later go on to run the Government’s Covid-19 Test and Trace scheme before leaving in April amid heavy criticism.
The firm’s current chief executive is Tristia Harrison, who is married to former Carphone Warehouse chief executive Andrew Harrison.
An acquisition of Talk Talk would give the buyer a substantial boost in the ongoing battle to grab market share of the rapidly expanding ultra-fast internet market. It also marks the latest step in a drive to consolidate the telecoms sector, which has suffered from declining value in recent years. Some in the industry have said it is suffering from excess competition as larger players and smaller rivals fight over customers, forcing down prices and holding back investment in the UK’s digital infrastructure.
Vodafone is under pressure from Cevian Capital, one of Europe’s biggest activist investors, which earlier this year revealed it had bought a stake in the group and has since been pushing for an overhaul of the business.
However, some in the City thought a Vodafone swoop on TalkTalk could prompt a backlash from investors.
‘If Vodafone does go ahead with an acquisition, a lot of people would ask why they didn’t do this the last time TalkTalk was up for sale,’ said Carl Murdock-Smith, telecoms analyst at investment bank Berenberg.
He added that while TalkTalk was small compared to Vodafone, which has a market cap of nearly £36billion, any acquisition would likely be received ‘poorly’ by its shareholders.
‘Investors are looking for Vodafone to either do disposals or mergers, not acquisitions of low-quality operators,’ MurdockSmith said.
Others are worried that a tie-up could draw scrutiny from competition regulators. Vodafone shares rose 0.7 per cent, or 0.84p, to 127.68p.