TalkTalk Telecom is ringing the wrong number with the City, amid concerns its trading update in early February will prove disappointing.
The company has been criticised for poor customer service, and as a consequence has been losing subscribers. Analysts at Espirito Santo said the market may be being too optimistic about the effect of these factors on its business. They said:
In our view consensus forecasts for third quarter total revenues of £423m and subscriber net losses of 21,000 may be too high. We estimate revenues of £418m and subscriber losses of 47,000 – note TalkTalk lost 70,000 subscribers in the first half and new guidance is that net adds are not expected to turn positive until "the first half of 2012".
We understand the reputational damage from numerous reports of TalkTalk's poor customer service has been having a negative impact on churn and in our view it will take long time to repair damage to the brand (i.e. we expect no recovery in the trends in the third quarter whereas consensus seems to). L
Before TalkTalk's [update] we will have BSkyB interim results on 31 January and BT Group results on 3 February and we believe the latter two operators are likely to have again gained a disproportionate share of the growth in the broadband market, largely at the expense of TalkTalk.
TalkTalk's shares are currently 2.6p lower at 123.2p.
