TalkTalk to launch its own-brand mobile services after deal with Vodafone

TalkTalk offices in west London. The telecoms firm has said it has agreed a £1.1 billion takeover by investment company Toscafund and private equity firm Penta (PA)

The broadband company TalkTalk is to launch mobile phone and data services under its own brand after striking a deal with the network giant Vodafone.

TalkTalk, which was spun off from the Carphone Warehouse group in April, said it will offer the voice tariffs and mobile broadband contracts from the autumn.

Under the mobile virtual network operation (MVNO) agreement with Vodafone UK's wholesale division, Talk-Talk's customers will be able to add the new services to their existing broadband and fixed-line contracts.

While the move was widely expected after the demerger with Carphone Warehouse, it further demonstrates the scale of TalkTalk's ambitions since it launched free internet access in 2006. TalkTalk, which entered the fixed line market in 2003, is the UK's second-biggest broadband provider – behind BT – with 4.23 million customers.

While City analysts are sceptical about the level of additonal revenues TalkTalk's MVNO will generate, they said that signing up customers to additional services reduces the chances of them jumping ship to a rival. Steve Malcolm, an analyst at Evolution Securities, said: "It [TalkTalk's MVNO] is a sensible bolt on."

Read More: TalkTalk broadband packages

But he added: "It is as much about keeping churn down and holding on to customers, than it is about delivering a substantial return. Very few MVNOs make money."

Virgin Media is the UK's biggest MVNO with 3.1 million customers, including 1.1 million on a contract, while the market is also populated by the grocery giant Tesco.

TalkTalk unveiled the agreement with Vodafone alongside its first quarter trading, which was in line with expectations. The group added 34,000 net broadband customers over the three months to 30 June.

TalkTalk said the first quarter figure "reflected the slightly slower quarter-on-quarter customer growth typically seen in our business in the first half of the year".

The company added: "Churn across the base remained broadly unchanged." The company grew its total revenues by 31 per cent to £444m.

Charles Dunstone, the chairman, said: "We maintained our momentum in the broadband market, as our brand and tariffs continued to appeal to customers seeking straight-forward, value-for-money broadband and voice services."

Over the quarter, TalkTalk grew its average revenue per user to £23.90, up from £23.30 last year.