10 th May 2017

Preliminary Results FY17

Introduction Charles Dunstone

FY17 Review Tristia Harrison

Financial Review Iain Torrens

Strategic Overview Tristia Harrison

Operational Priorities Charles Bligh

Summary Tristia Harrison

Q&A

Agenda

2

Introduction

3

Performance Review

FY17

4

Strong foundations for delivering future retail growth

• Net add growth from (71K) in first 9m to +22K inQ4

• Over1m customers on our Fixed Price Plans now, with

strong brand momentum and NPS

• Nearly 60% of on-net Retail base in-contract

• Re-launched our brand focusing on four values

• Simple

• Affordable • Reliable • Fair

Leading to happier, more loyal customers; lower churn and positive retail net adds

262

477 601

733 860

993 1,070

Oct Nov Dec Jan Feb Mar Apr

FLPP Take-Up

5

105 119 121

173 145 119

97 120 157

Another strong year in TalkTalk Business

Corporate Revenue

FY17 FY16 FY15

Data

Voice

Carrier

£ 397m £ 384m £ 375m

4.2% *

*Excluding Carrier

31%

• Data revenue growth of 30%+

• Significant slow down in the decline of legacy voice

97

173

105

120

145

119

157

119

121

6

Improving customer experience in retail and B2B

• Completed MTTS – savings in year of £34m, cumulatively delivered £87m

• Measurable improvement in retention and customer satisfaction

• Strong churn improvement On Net Churn

Q1 Q2 Q3 Q4

1.40%

1.58%

2.11%

1.36%

1.36% 1.43%

1.64%

1.40%

FY16 FY17

Customer Experience

Dec-16 Jan-17 Feb-17 Mar-17 Apr-17

CSAT

NPS

7

Customer Base Development

Ethernet base

Broadband base

▪ Consistent growth

▪ Strong product take-up

▪ Strong progress in Ethernet order conversion

▪ Healthy pipeline

Penetration

8

Q4 performance: clear evidence of growth

On-Net Net Adds

Q1 Q2 Q3 Q4

(9) (20)

(42)

22

On-Net Churn

Q1 Q2 Q3 Q4

1.4%

1.6%

1.4% 1.4%

Corporate Revenues

Q1 Q2 Q3 Q4

(4.4%)

9.2%

3.0%

9.1%

Underpinned by a number of important regulatory announcements which will drive improvements to service and price optionality over the coming years

9

Financials FY17

10

10

Summary Profit & Loss FY17 FY16

£’m £’m

Headline Revenue 1,783 1,838

Gross Profit 949 993

Operating costs & SAC (645) (733)

Headline EBITDA 304 260

Margin 17.0% 14.1%

Profit after tax 100 79

Headline EPS (Basic) 10.5p 8.4p

Dividend per share 10.29p 15.87p

11

£1,838m

£1,783m

FY16 On-Net Off-Net Data Legacy Voice Carrier FY17

Wholesale

FY16

FY17

Wholesale Mix & Fibre Penetration

Fibre FY16

FY17

On-Net ARPU Revenue

Gross Margin

FY16 On Net Data Voice & Carrier FY17

77%

19%

3%

15%

6%

Revenue and Gross Margin

54.0%

1.8%

53.2%

2.3%

1.3%

£37m

£26m £11m

£57m

£2m £0.39

£0.26 £0.56

£0.46

£28.16

£28.53

77%

FY16 FY17 Mix Voice Usage

Triple / Quad Play

Pricing & Proposition

Calculated as % of average base

12

Opex and SAC

13

• MTTS incremental in year savings

• Lower gross adds in year drive lower SAC

• Channel optimisation reflects extended distribution agreement

FY16 FY17

Opex £473m Opex

£459

SAC £186m

SAC £260M

£645m

£733M

13

Summary Cashflow £’m FY17 FY16

EBITDA 304 260

Working Capital (28) 10

CAPEX (133) (166)

Operating Free Cash Flow 143 104

Interest and Tax (33) (22)

Free Cash Flow 110 82

Acquisitions (18) (12)

Exceptional Items (46) (88)

Share Sale 1 63

Dividends (150) (135)

NET CASH FLOW (103) (90)

Net Debt * (782) (679)

Net Debt / EBITDA 2.57x 2.61x

* Net of derivatives £39m

OUTLOOK

• Working Capital to stabilise

• CAPEX to revert to 6-7% of revenues

• Exceptional Items to fall to £10m - £20m

• Net Debt to reduce in FY18

14

Review Strategic

15

UK’s leading value for money connectivity provider

Grow the Retail base

Sustain momentum in B2B

Step change in customer experience and operational efficiencies

Fixed network investment

Ruthlessly prioritise our core strengths

Less capital intensive priorities

16

Sustained Retail Base Growth

• Long term price certainty

• Ongoing simplification of our product and pricing portfolio

• Ongoing investment in fixed price plans

• New plans available to both new and existing customers

Happier, more loyal, lower churning customers and net adds growth

17

Driving ARPU (Fibre, TV and mobile and pricing)

• Strong fibre take up among new and existing customers

• Material improvements in TV quality and engagement

• New distribution model for Mobile

• Sensible pricing decisions; always the value provider

18

Sustaining momentum in TTB

130.9 144.2

161.5 178.8

198.4 220.4

244.8

274.6

2013 2014 2015 2016 2017 2018 2019 2020

National & Metro Ethernet Volume Forecast Data revenues: high growth and high margin

Phone and BB (retail and wholesale)

Legacy Voice

Carrier TalkTalk Group

Data & Next Gen Voice

Gross Margin

Growth

*Ovum Forecasts

Regulated pricing + dark fibre offer further opportunities

19

Priorities Operational

20

2015 (a) 2016 (a) 2017 2018

Customer demand & expectations

Always on - “An essential utility" .

Source: OECD, Cartesian

Fixed line - average household usage (GB/month) Average Number of Connected Devices

10

25

50

2012 2017 2022

97

132 160+

220+

21

Driving operational excellence

Will Deliver

• Cost reductions

• Simplification

• Total cost focus

• Operational stability.

Quality Cost Opex/Revenue declining over time

COO

Consumer Operations

B2B Operations

Network IT

Procurement Security

22

Delivering a step change in customer experience

▪ Multichannel

▪ Digital First

▪ Case Management

Consistently good Service Join/Move & Repair In Home Experience

▪ Routers

▪ Homesafe 2.0

▪ Nuisance Calling .

▪ Join/Move re design

▪ Repair re design

.

Customer Satisfaction Churn

23

The Network Story – in 3 phases

2008 2012 2014 2016 2006 2018 2020

Build UK First All IP network

500 Exchanges

3037 Exchanges

Core Upgrade

New DNS/DLM Exchange Upgrade

FTTP

Ethernet, IPTV, FTTC

Dark Fibre Deployment

BUILD & SCALE UPGRADE

NEW PRODUCTS

24

Sam Knows - External Network Performance

25

Ranking of Top 5 FTTC providers

We are ranked 1st from Peak throughput %

April 15 April 16 Sept 16 April 17

Note: Ranking of 2 denotes 2nd best in performance, Sam Knows Industry Panel 2017

3.5

3 3

2

Ran

kin

g

Network upgrade

FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26

Cost/gb

Delivered within the normal CAPEX envelope

Exchange upgrade

Dark Fibre rollout

=

Hold network opex with customer & usage growth

Tota

l Net

wo

rk O

PEX

Open Existing Backhaul Opex - Dark Fibre

£75m

26

Growing confidence in FTTP from York

27

Progress to date Next steps

• 14k homes passed at build cost of under £500 (T1 / T2)

• 27% penetration of serviceable homes

• Majority of TalkTalk customers

• Excellent customer feedback

• ASAT at 82%

• Churn to date is 1 customer

• 100% uptime since launch

• Complete build of FTTP across York (40,000 homes)(T3)

• Continued to learn and drive down build cost / increase take-up

27

POP

POP

Summary

Strong plan for delivering sustained growth in retail and B2B

Step change in customer experience and ongoing fixed network investment

Fewer simpler priorities

28

Outlook and Guidance

• Modest base and revenue growth

• EBITDA £270 - £300m

• Net debt reduced

• Dividend 7.5p

• Total broadband base

• Retail and B2B revenues

FY18

Future KPIs

29

Appendices

30

Our Network Infrastructure today

31

KPIs

FY13 FY14 FY15 FY16 FY17

H1 H2 H1 H2 H1 H2 H1 H2 H1 H2

On-Net Base (m)

Broadband & Voice 3.162 3.295 3.402 3.570 3.656 3.775 3.728 3.658 3.638 3.637

Broadband Only 0.642 0.575 0.526 0.490 0.449 0.402 0.369 0.338 0.329 0.310

Total 3.804 3.870 3.928 4.060 4.105 4.177 4.097 3.996 3.967 3.937

On-Net Churn (p.m.) 1.6% 1.5% 1.6% 1.6% 1.4% 1.3% 1.5% 1.7% 1.4% 1.5%

Mobile (m) 0.117 0.175 0.236 0.284 0.348 0.464 0.596 0.699 0.793 0.913

Fibre (m) 0.030 0.073 0.142 0.207 0.308 0.479 0.578 0.704 0.779 0.927

TV (m) 0.000 0.230 0.557 0.917 1.217 1.414 1.439 1.389 1.333 1.288

Ethernet and EFM lines 7,100 10,200 13,700 17,400 21,600 26,200 30,700 35,100 39,300 42,700

Total Broadband (m) 4.043 4.063 4.076 4.196 4.221 4.283 4.189 4.072 4.036 4.009

Revenue (£m)

On-Net 573 597 612 642 648 685 697 702 670 672

Off-Net 95 83 69 59 46 41 27 28 24 20

Corporate 160 162 162 178 177 198 188 196 208 189

Total 828 842 843 879 871 924 912 926 902 881

On-Net ARPU (£) 25.27 25.93 26.16 26.79 26.45 27.57 28.08 28.91 28.05 28.30

32

FY17 Preliminary Results 10 th May 2017

33