Are Talktalk Telecom Group PLC Shares A Better Buy Than Vodafone Group plc, BT Group plc, SKY PLC And ITV plc After Q3 Update?

Will shares in Talktalk Telecom Group PLC (LON:TALK) (LSE:TALK.L) rise faster than shares in Vodafone Group plc (LON:VOD) (LSE:VOD.L), BT Group plc (LON:BT.A) (LSE:BT.A.L), SKY PLC (LON:SKY) (LSE:SKY.L) and ITV plc (LON:ITV) (LSE:ITV.L)

Talktalk Telecom Group PLC
Talktalk Telecom Group PLC

Talktalk Telecom Group PLC (LON:TALK) (LSE:TALK.L) has released a Q3 trading update to the stock market. Its shares have risen 5% as investors digest the news. The company’s revenue of £435 million is below Q3 in the previous year, where it was £459 million. This comprised of On-net revenue of £332 million against £351 million in the previous year, while Corporate revenue was £92 million against £95 million and Off-net sales were £11 million versus £13 million from the previous year.

Talktalk’s investment potential has been improved in my view by the launch of its Fixed Low Price Plans in early October. The company has recorded 516,000 customers re-contracting on the 18m plan during Q3, which represents over 13% of the on-net base at the end of Q3. An additional 81,000 customers have re-contracted during the first four weeks of January, of which over 75% have re-contracted on the newly introduced 24m plan. Re-contracting customers have shown strong upselling activity, with 20% choosing to buy voice call boosts and 12% taking fibre.

The re-contracting will deliver more stable EBITDA in the long term, but will also hurt profitability this year. EBITDA is expected to be in line with previous guidance and the final dividend is expected to be 10.58p, unchanged on the previous year.

However, I feel the biggest news for investors from today’s stock update is Talktalk’s CEO has announced she will leave the company. There will be a transition between now and May, with Sir Charles Dunstone becoming Executive Chairman from his current role of Non-Executive Chairman.

In the last six months, shares in Talktalk have fallen by 27%. That’s a worse performance than TMT peers Vodafone Group plc (LON:VOD) (LSE:VOD.L), BT Group plc (LON:BT.A) (LSE:BT.A.L), SKY PLC (LON:SKY) (LSE:SKY.L) and ITV plc (LON:ITV) (LSE:ITV.L). Vodafone’s shares are down 15%, BT’s stock price is 24% lower, SKY’s shares are up 10% and ITV’s share price is 5% higher.

In my view, Talktalk has long term investment appeal. I believe the TMT space has growth opportunity and the lines between the three components within the industry are being blurred. This creates cross-selling opportunities in my opinion, which could improve the company’s share price performance. I think there could be some uncertainty with a change in management, but feel investors are likely to take this in their stride judging by how the stock has performed so far today.

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