A brighter place for everyone

An  Introduc+on  to    TalkTalk  Business  

February  2013      

Chief  Execu+ve    

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!   Growing  TalkTalk  Business  is  an  important  element  of  our  medium  term  2%  revenue  and  25%  EBITDA  margin  targets  

!   £425m  revenue  business  today,  of  which  £315m  Corporate  and  £110m  basic  business  phone  and  broadband  

!   Similar  opportunity  to  grow  revenue,  simplify  operaJons  and  expand  margin  as  in  our  Consumer  business  

!   Similar  opportunity  to  leverage  the  cost  and  technology  advantage  of  our  network  

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Managing  Director,  TalkTalk  Business    

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!   £425m,  scale  business    

!   The  only  B2B  operator  apart  from  BT,  VMEd  and  C&W  with  significant  network  presence  

!   140,000  SoHo/SME  customers  

!   1,400  mid-­‐market  and  corporate  customers  

!   750  Partners  ranging  from  resellers  to  systems  integrators  

!   Key  contributor  to  Group  revenue  and  profits  

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Enterprise: 2k+ e’ees

Mid Market: 250 – 2,000 e’ees

SME: 10 – 250 e’ees

SOHO: < 10 e’ees

Direct  Channel  

Partner  Channel  

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CONSUMERS

Voice

Data

Carrier

Enterprise   Voice  Over  Ethernet  (VOE)  

IPVPN  Networks  Ethernet  /  EFM  

Voice  Interconnect  Wholesale  Transit  

Mid  Market  ISDN30  

Hosted  Contact  Centre  Hosted  PBX  

IPVPN  Networks  Ethernet  /  EFM  

Ethernet  over  Fibre  (EoF)  

SME  ISDN30  /  ISDN2  

Hosted  Contact  Centre  Hosted  PBX  

EFM  /  EoF  Fibre  

SOHO   Phone     Fibre  DSL  (MPF  /  SMPF)  

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Call  Bundles  with  Broadband   NEW  Next  Gen  ISDN  /  SIP  

Local  &  na+onal  calls  for  SOHO  and  Small  

SME  

Contact  Centre  specific  services  Mul+ple  line  services  for  SME  and  Mid  Market    

Hosted  PBX/UC   Premise  based  phone  systems  

Contact  Manager  

Voice  over  Ethernet  

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10  MB  EFM  MPF  &  SMPF  Broadband   Fibre   100  MB   Gig  

<  £20  p.m.   From    £25  p.m.  

From    £1,000  p.m.  

From    £350  p.m.  

From    £100  p.m.  

Asymmetric,  asynchronous,  Contended,  business  SLAs,    

<2Mbps  upstream  

Symmetric,  synchronous,  non-­‐contended,  business-­‐grade  SLAs,  high  speeds  

High  speed    asymmetrical  

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EoF  

Voice  49%    

Data  37%  

Carrier  14%  

Direct  50%  

Partner  50%  

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By  Product*  By  Channel*  

*  9m  to  31st  December  2012  

Typical Competitors

Carriers

Typical Partners

Integrators

Customers

Enterprise

Mid Market

SME

SOHO

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Virgin Media BT

Cable & Wireless

e.g. Daisy

e.g. XLN, O2, Chess,

e.g. ZEN, NewCall,

Resellers

ISPs

Value For Money £10 business broadband

Competitive ethernet pricing

Product Innovation On-Net SIP & ISDN30

(30% cheaper than BT) FTTC – only scale alternative

to BT Wholesale

Service Quality 6 Hour Fix on Fibre

Public sector certified Carrier / Enterprise grade

service model

Reach 95% coverage

More Ethernet exchanges than BT Wholesale

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!   Large  Direct  customer  base  with  up  and  cross  sell  potenJal  

!   Vibrant  Partner  channel  that  scales  quickly  for  revenue  build  

!   Legacy  voice  revenues  in  decline  but  momentum  growing  in  a  strong  

set  of  high  margin  data  products  

!   Opportunity  to  simplify  operaJons    ahead  of  driving  scale  

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!   Significant  opportuniJes  through  Partner  channel  and  Direct    

!   Only  10%  of  SME  customers  take  our  data  products  !   ConJnued  expansion  of  Ethernet  products  

Data  

Carrier  

Voice  !   Established  declining  trend  in  legacy  voice  !   Growing  selecJvely  through  next  generaJon  ISDN  

and  SIP  proposiJons  

!   Core  revenue  and  new  market  growth  !   ConJnued  expansion  of  internaJonal  trading  !   New  opportuniJes  in  data  

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Strong growth in high margin products

Improving customer service

Simpler systems and processes

!  Broadband  &  Fibre  vs  Voice  

!  Ethernet  family  

!  New  Next  Gen  Voice  

!  Growth  in  new  segments  e.g.  

integrators  and  public  sector  

 

!  Business  and  Enterprise  grade  service  model  

!  Consolidate  service  teams  in  Warrington  and  Irlam  

!  Closing  Stoke  Mandeville  

 

!  InvesJng  in  online  !  RaJonalising  legacy    products  and  systems  

!  Fewer,  beaer  systems  

 

Making TalkTalk Simpler

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!   Network  scale  and  design  allows:  ›  Product  innovaJon  ›  CompeJJve  pricing  ›  Flexibility  

!   A  simplified  and  effecJve  operaJng  model:  ›  Lower  costs  to  serve  as  scale  grows    

!   The  value  player  in  the  B2B  market  

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B2B  Opera+ng  Efficiencies   Fibre  Value  for  money  

quad  play  

Largest  UK  Unbundled  Network  

Base  Growth  from  20%  of  UK  not  online  

Offnet  decline  

Base  Growth  from  lower  churn  

Plus  Mix  

Mobile  +  TV,  content  ARPU  

Data  and  Carrier  

Fibre  demand  grows  with  TV  

Making  TalkTalk  Simpler:    £30m-­‐£50m    

Growing  Data  services  

Lower  gross  margin  %  

Growth  in  fully  unbundled  mix  

Lower  SAC  from  lower  churn  

Higher  margin  Plus  

Lower  costs  to  serve  

2%  REVENUE  CAGR  

25%  EBITDA  MARGIN  

Legacy  Voice  

Investment  in  network  

TV  Content  gross  margin  %  

Declining  lower  margin  legacy  Voice  

SAC  to  build  TV  and  mobile  

Base  growth  for  TV  

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A brighter place for everyone

February  2013