Takeover speculation is swirling once more around UK telecoms group TalkTalk (TALK). City gossip suggests that the group may be using aggressive mobile tariff pricing as a strategy to tempt mobile giant Vodafone (VOD) into proposing a buyout of the FTSE 250 group. Investors should ignore the chatter.

TalkTalk runs a virtual mobile network alongside its landline and internet services using Vodafone’s infrastructure, for which it pays a fee. According to recent analysis of mobile network performance and SIM-only tariffs by analysts at investment bank Berenberg, TalkTalk stands out amid a highly competitive environment.


Packaged up with a simple YouView TV service, TalkTalk is pushing its multi-play convergence hard in order to drive new customer sign-ups, a tactic believed to be an attempt to ‘force Vodafone’s hand into an acquisition.’

Berenberg remains sceptical over such a deal, believing it a poor fit for Vodafone because of TalkTalk’s low-quality customer base. The bank also raises doubts over valuation, given that TalkTalk’s share price has soared by around 120% since the start of 2012 to 301.5p, putting the stock on a price to earnings (PE) multiple of 21.1 for the year to end March 2015, a high rating.

Issue Date: 01 Sep 2014