London - Competition is ramping up in Britain's broadband market, where providers have cut prices in the last three months to combat a sales slowdown, according to the fourth biggest player TalkTalk, whose shares have dropped sharply.
TalkTalk, providing the first trading update for the three months to June ahead of rivals BT and Sky, said the overall broadband market had been softer than previous quarters due to a quiet consumer environment.
“In the spring, in the run up to the election, we just saw a quiet market,” CE Dido Harding told Reuters.
“As a result everyone has been driving more promotional activity,” she said, adding TalkTalk had engaged in some price cuts where necessary.
First-quarter revenue was up 3.5 percent year-on-year, marking a slowdown from the 6 percent recorded in the previous three months.
The revenue slowdown and the fact that 2016 earnings growth will be more weighted to the second half than the first, sent shares in TalkTalk down more than 8 percent.
Sky was flat and BT down nearly 1 percent in line with the wider FTSE 100. Virgin Media is owned by the U.S. based Liberty Global and does not trade in London.
Other companies sensitive to consumer spending trends such as newspaper groups have noted that some business slowed in the run up to Britain's national election in May, with big consumer goods groups pulling advertising ahead of the vote.
Credit Suisse also noted that the June quarter tended to be seasonally weak for the industry.
TalkTalk, like its rivals, offers a “quad play” of telephone, broadband, mobile and TV services, aiming to increase the amount each customer spends with it.
This approach helped it to raise its two-year revenue growth target in May. The group said it remained on track to deliver its target of full-year revenue growth of 5 percent and noted that it had seen a pick up in the market in July.
Analysts at Jefferies, which rates TalkTalk “underperform”, said momentum could rebound in the balance of the year and reiterated they were comfortable with their own forecasts.
Reuters