TalkTalk CEO Makes Way for Founder Dunstone After Stock Dropby
Head of consumer business Harrison to become CEO in May
Founder, top shareholder Dunstone to become executive chairman
TalkTalk Telecom Group Plc Chief Executive Officer Dido Harding is stepping down as the company’s founder, Charles Dunstone, takes a more active role at the telecommunications provider following a 60 percent stock decline in less than two years.
Harding, TalkTalk’s only CEO since it was spun out of retailer Carphone Warehouse Plc in 2010, will leave in May, the London-based company said Wednesday as it reported a drop in third-quarter revenue. Dunstone, currently non-executive chairman, will become executive chairman at the same time and give up his role as chairman of Dixons Carphone Plc. Tristia Harrison, who heads TalkTalk’s consumer business, will become CEO.
Harding, 49, embraced the role of underdog at TalkTalk and spoke out for tighter regulation of former U.K. telecom monopoly BT Group Plc. While she had success building the brand, TalkTalk ultimately struggled to compete against larger broadband rivals, and never fully recovered from a 2015 hacking attack that cost TalkTalk profits and customers, and angered investors.
“I’m a really big believer in CEOs not staying forever, and I want to move to more of the stuff in public service that I’ve started to do over the last few years,” Harding said on a conference call. She has held the title of Baroness Harding of Winscombe since joining Britain’s House of Lords in 2014 as a Conservative member. “I’ve decided it is time to start the process of transitioning.”
The shares surged as much as 10 percent, as the company also forecast customer stabilization in the fourth quarter and a return to growth. The stock climbed 8.9 percent to 170.40 pence at 1:25 p.m. in London, giving TalkTalk a market value of 1.6 billion pounds ($2 billion). Since peaking at 408.80 pence in June 2015, the shares had fallen 62 percent prior to the announcement.
With short interest at 11 percent of free float, according to Markit data, short-covering may be contributing to Wednesday’s stock rise, according to Stephane Beyazian, an analyst at Raymond James in London.
“Bearish investors may fear positive strategic changes from a new management,” Beyazian said in an e-mail.
TalkTalk has been dogged by unsatisfied customers and lately has improved its ranking. Once the second-most complained about mobile operator in the U.K., it was fourth in the third quarter -- in line with the industry average -- according to figures from communications regulator Ofcom. BT remained the most-complained about operator.
“We are now markedly better than our big nemesis, BT, which is probably a very nice way to end this call,” Harding said, offering a parting shot at TalkTalk’s larger rival.
Charles Bligh, who runs TalkTalk’s business division, will become chief operating officer. Dunstone, the company’s largest shareholder, said on the call he wanted “continuity of the team.”
Dunstone, 52, co-founded Carphone Warehouse 27 years ago and owns 31 percent of TalkTalk, according to data compiled by Bloomberg. Dixons Carphone was formed in 2014 with the merger of Carphone Warehouse and Dixons Retail.
TalkTalk has strong momentum and its fixed-price payment plans have resonated with customers at a time when competitors are raising fees, Dunstone said.
Harding has been a prominent voice in the U.K. telecommunications industry, vocal in her opposition to BT’s acquisition of mobile carrier EE, completed last year. Harding has also been critical of BT’s spending on its infrastructure unit Openreach, which TalkTalk uses to provide broadband to its customers, and has pushed for the structural separation of the division.
The 2015 hacking episode led to a 400,000-pound fine, and Harding, who acknowledged underestimating cybersecurity risks, last year donated her annual bonus to charity. Britain’s data-protection regulator said TalkTalk failed to scan for possible threats after taking over Tiscali SpA’s U.K. operations in 2009 and was unaware of vulnerable web pages.
Third-quarter revenue at TalkTalk fell 4.8 percent to 435 million pounds as the company felt the impact of high levels of re-contracting and re-pricing of legacy tariffs. The company said it sees positive on-net customer adds and fewer customers leaving the business in the fourth quarter with “a stable and higher-quality retail base” driving revenue growth next year.
“It is a priority to get the business growing again,” Dunstone said. The company will announce plans for its business, including the dividend outlook, in May, he said.