TalkTalk says back on track after cyber attack

By Paul Sandle

LONDON (Reuters) - British broadband operator TalkTalk said it had bounced back from a customer data theft in October, stabilizing its customer base in the final quarter after 95,000 subscribers left following the breach.

The company, which positions itself as a low-cost option against BT (NYSE: BT), Sky and Virgin Media (NASDAQ: LBTYA), said its customer base remained flat in the three months to the end of March.

It also reported its lowest-ever churn, the percentage of its customer base that had switched, of 1.3 percent.

"The business bounced back strongly in the final quarter following the cyber attack," Chief Executive Dido Harding said, adding that full-year core earnings had risen 6.1 percent to 260 million pounds ($376 million), in line with its guidance.

Yet the cost of the attack, when the personal details of 157,000 customers were stolen from its database via its website, was clear in its statutory pretax profit.

It more than halved to 14 million pounds after exceptional items of 83 million pounds.

The fastest growing part of TalkTalk's business is mobile, provided through renting capacity from a network operator.

It will change provider to O2 (NYSE: TEF) from Vodafone (NASDAQ: VOD) this year, and could have benefited from the larger combined network of O2 and Three if Brussels had not blocked a merger between the operators on Wednesday.

Harding said the failure of the deal was a positive for TalkTalk.

"I have an MVNO (mobile virtual network operator) partner which is more focused on its existing customers rather than on integrating with another company," she said.

O2 owner Telefonica has said it will examine options for the British operator, a move that could throw up an opportunity for TalkTalk to participate in a deal.

"Of course we'll look at everything that is happening, but we are very happy with our strategy as its stands," Harding said.

She said the company would also consider a trial of its own fibre network using BT's poles and ducts infrastructure, something regulator Ofcom is keen to encourage.

She added, however, that a separate infrastructure business would need to be set up to fund the network, with TalkTalk bringing the customers.

"Realistically we are talking about a 5 billion pound investment over a decade. Our contribution to that would be acquiring customers and putting them on that network as opposed to putting that sort of debt on our balance sheet," she said.

Shares in TalkTalk were up 1.03 percent at 274 pence at 1115 GMT.

(Reporting by Paul Sandle; Editing by Toby Davis)

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