BT agrees rescue deal to buy broadband operator TalkTalk

The UK's biggest broadband provider, BT, has agreed to buy rival operator TalkTalk to save the company from collapse.

The takeover would end of months of speculation over the future of TalkTalk and mean services for its millions of customers will continue as normal.

BT chief executive Alison Kirkby said it provided "a safety net" for those who rely on TalkTalk. The administrator, Alvarez & Marsal, said it also provided certainty for TalkTalk's 900 staff.

However, Virgin Media called the deal a "stitch up" which allows BT to "tighten its grip" over the market. The government has given itself the power to have the final say on the takeover, citing its importance to critical public services.

TalkTalk has 1.5 million retail customers and one million wholesale customers across the UK.

BT's Kirkby told the BBC's Today programme: "Two and a half million customers, including vulnerable households, and key emergency services might have lost their services if Talk Talk had failed, which it was on track to do.

"So BT stepped in as we were the only viable option to take the business forward."

Ernest Doku from comparison website Uswitch said the deal means "nothing changes today".

"Your broadband and landline carry on as normal, and there is nothing you need to do right now," he added.

However, he said that BT should explain "quickly and plainly what this means for contracts, prices and service in the future, so nobody is left guessing".

The regulator, Ofcom, says broadband customers should have the right to leave a contract without an exit fee, external if a new owner puts the price up beyond what was in the contract.

TalkTalk began as a challenger to BT in the broadband market. It was listed on the London Stock Exchange, but was taken over by private equity in 2021.

Since then, the firm has built up debt while losing customers, leaving it unable to pay some of those it owes money to.

The Competition Markets Authority (CMA) will need to approve the takeover, which would give BT greater power over the broadband market.

Tom Smith, a competition lawyer and former legal director at the CMA, said the regulator will be balancing that concern with other considerations.

"When the CMA looks at it, it will look at what would have happened if the deal wasn't going through," he told the BBC.

"If TalkTalk would have exited the market, for example, then really any deal is better than TalkTalk exiting, but then there might be alternative bidders as well that would have been less anticompetitive."

However, the Department of Culture, Media, and Sport (DCMS) has given itself the power to make the final decision on the deal in the name of the public interest once the CMA has made its report.

DCMS has given the CMA until 19 October to deliver its verdict.

Culture Secretary Lisa Nandy said: "Phone and broadband services are vital national infrastructure.

"If TalkTalk services fail, there is a genuine risk to life and public services – including to hospitals, schools and emergency care. These are unprecedented circumstances that require action now."

BT has said it welcomed the intervention and would "work constructively with the government and the CMA during their review".

Judith Mackenzie, a partner at investment manager Downing, told the BBC that broadband was "not a regulated industry, unlike electricity and water, but it's also very important to business users and ourselves, consumers".

"It's almost like a commodity now, broadband," she added.

BT has said it will cost the firm £400m to buy TalkTalk out of administration.

This includes the purchase price, fees, TalkTalk's expected £60m loss for this year, and BT effectively writing off the £100m TalkTalk owes BT's Openreach business.

TalkTalk has £1.5bn of debt and made a £100m loss last year.

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