TalkTalk slides as revenue misses; warns over broadband competition

22nd Jul 2015 09:20

(ShareCast News) - TalkTalk slumped on Wednesday after it said the broadband market has become increasingly competitive and posted weaker-than-expected revenue growth for the three months to 30 June.TalkTalk said revenue grew by 3.5% year-on-year as strong growth in on-net and corporate offset the continuing decline in off-net revenues. However, this was significantly weaker than expected.In addition, the company struck a cautious note on the broadband market, saying it was softer than it has seen in recent quarters, with higher promotional activity in the sector.Still, TalkTalk said it has made a good start to full-year 2016 and it's on track to deliver full-year revenue growth of 5%.The company, which offers a quad play of telephone, broadband, mobile and TV services, said core earnings in 2016 are expected to be weighted towards the second half, with revenue growth accelerating through the year against operating costs weighted in the first half."This weighting is expected to be more pronounced than in previous years, driven primarily by the timing of operating costs and savings from MTTS," it said.Nomura said revenue was "weak" and the company's performance on that front "will make the market incrementally concerned about its longer-term profitability target.""A strong top-line was the sole factor that we thought TalkTalk could deliver to maintain investor confidence, but this too now seems to be difficult."Nomura had expected revenue growth of 6.5%.It said: "We continue to believe that TalkTalk is running short of time to optimise its margins before structurally lower profitability takes hold in a superfast broadband world."Nomura rates the stock at 'reduce' with a 220p price target.At 11:26, shares were own 8.6% at 356.90p.