1 2 3 Accelerating broadband (+25,000), fibre (+101,000) and - PowerPoint PPT Presentation

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Accelerating broadband (+25,000), fibre (+101,000) and mobile (+64,000) net adds More TV net adds than the rest of the market put together (+300,000 net adds) Significant reduction in year-on-year churn to 1.4% Strong growth from TalkTalk Business (H1 Corporate revenues +9.3%) Acquisition of Virgin Media’s substantial National customer base Revenue growth accelerating and on track to deliver >4% full year growth EBITDA margin of 12.6% in H1 (9.0% in H1FY14) Operating FCF up 120% Demand for broadband, fibre and mobile stronger than expected earlier in year Expect incremental £20m-£25m SAC investment to take advantage of stronger volumes in H2 Interim Dividend up 15% to 4.6p 4

4.047m 4.043m 4.053m 4.063m 4.071m 4.076m 4.186m 4.196m 4.206m 4.221m 1,217k 1,102k 917k 732k 557k 390k 230k 80k Q1 '13 Q2' 13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q2' 13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 22k 348k 19k 308k 308k 17k 284k 260k 15k 236k 241k 14k 202k 207k 12k 152k 175k 10k 177k 9k 142k 7k 117k 95k 5k 85k 73k 52k 30k 15k Q1 '13 Q2' 13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q1 '13Q2' 13Q3 '13Q4 '13Q1 '14Q2 '14Q3 '14Q4 '14Q1 '15Q2 '15 Q1 '13 Q2' 13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 5

Broadband Fibre Mobile TV Q2'15 15k 67k 40k 115k Q1'15 10k 34k 24k 185k Q4'14 10k 30k 185k 24k Q3'14 7k 35k 175k 24k Q2'14 5k 47k 167k 34k Q1'14 8k 22k 160k 27k Q4'13 10k 21k 150k 23k Q3'13 10k 22k 80k 35k Q2'13 (4k) 15k 32k Q1'13 (19k) 7k 24k 6

1.46 1.35 1.24 Fastest broadband growth in 4 1.12 years 1.04 More TV net adds than the rest of H1'13 H2'13 H1'14 H2'14 H1'15 the market Phone and Broadband = 1RGU Larger base from which to upsell Seeing accelerating demand for broadband, mobile and fibre, and 2.0% sustained growth in TV 1.8% 1.6% 1.4% 1.2% 1.0% Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2'15 7

7.9m 7.1m 6.8m Significant year-on-year reduction 6.2m in call volumes (down 24%) and 5.3m 4.7m Ofcom complaints (down 30%) Service improvement programmes through root cause analysis H2 '12 H1 '13 H2 '13 H1 '14 H2 '14 H1 '15 Driving higher rates of fault resolution and online self- service 7,635 Multiple product take-up 4,858 4,333 3,556 A continuing journey that is at the 2,799 2,499 heart of Making TalkTalk Simpler H2 '12 H1 '13 H2 '13 H1 '14 H2 '14 H1 '15 8

3.6% 12.6% 3.1% +44.7% 9.0% 1.9% 1.7% £110m £76m Q1'14 Q2'14 Q1'15 Q2'15 H1 '14 H1 15 4.60 £174m -12.0% +15.0% £153m 4.00 3.45 H1 '14 H1 15 H1'13 H1'14 H1'15 9

Revenue, Overheads and Pre-SAC EBITDA Guidance unchanged Revenue growth of at least 4% Overheads as a percentage of revenue < FY13 Pre-SAC EBITDA margins > FY13 Expect a more modest reduction in year on year SAC than envisaged in previous guidance Strong year-on-year growth in EBITDA and EBITDA margin Expect accelerating volumes through H2 to drive additional SAC of £20m-£25m Lower cost per add Net debt Capex - 6% of revenue Cash exceptionals - £30m-£35m Dividend No less than 15% growth 10

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Trading approach is delivering results in line with our plan Revenue growth accelerating, SAC reducing, EBITDA and OFCF up y-o-y Revenue Growth 3.3%; EBITDA margin 12.6% Dividend up 15% year-on-year, in line with commitment On track to deliver 4% revenue growth and 25% EBITDA margin by FY17 12

£ million H1 FY15 H1 FY14 Growth Revenue 871 843 +3% Gross Profit 480 465 +3% Gross Margin 55.1% 55.2% Opex (217) (215) EBITDA pre SAC & Marketing 263 250 +5% EBITDA pre SAC & Marketing Margin 30.2% 29.7% +50 bps SAC & Marketing (108) (116) TV SAC (45) (58) EBITDA (1) 110 76 +45% EBITDA Margin 12.6% 9.0% +136bps Profit Before Tax 34 9 +278% Tax (7) (2) Effective Tax Rate 20% 20% Profit After Tax 27 7 +286% EPS 2.9 0.8 +263% (1) Excluding exceptional items and amortisation of acquisition intangibles 13

£ million H1 FY15 H1 FY14 Growth EBITDA 110 76 45% Working capital (11) (8) Capex (55) (48) Operating free cashflow 44 20 120% OFCF margin 5.1% 2.4% Interest and taxation (13) (8) 63% Free Cashflow 31 12 158% Acquisition & Share purchase (4) (22) Exceptional spend (11) (8) Dividend (74) (62) Net cash flow (58) (80) Opening Net Debt 497 393 Closing Net Debt 555 473 Net debt / EBITDA 2.25x 2.33x 14

3.3% y-o-y growth in H1 › On-net +5.9% On-net (+5.9%) • Base growth Base Voice Upsell & Corporate Off-net VAT • Price & proposition Price £871m • Voice & VAT £843m › Corporate +9.3% +3.3% • Data +55% › Off-net -33.3% H1 FY14 H1 FY15 • Only 5.3% of group revenues (FY14: 8.2%) Corporate Off-net Base £437m Acceleration in Q2 (+3.6%) ARPU › On-net +6.5% (base growth and £434m ARPU) +3.1% +3.6% Q1 FY15 Q2 FY15 15

On-net revenues to accelerate through H2: Corporate › Higher opening base Off-net +>4.7% Base • 254k (+7.5%) more fully unbundled ARPU customers than at the end of H1 FY14 • 660k (+118%) more TV customers +3.3% • 112k (+47%) and 166k (+117%) more mobile and fibre customers › Significant further acceleration in H1 FY15 H2 FY15 growth (broadband, mobile and fibre) › ARPU growth Growth in Corporate through data and traction in SoHo/SME broadband Continued voice decline and VAT impact H1FY14 H2FY14 H1FY15 H2FY15 Mobile Fibre TV BB 16

Growth in pre SAC EBITDA margin through CPA and marketing £110m › growth in revenue Gross Cost Profit & savings Volumes › gross margin Other £76m › cost saving initiatives SAC investment in BB, mobile, TV and fibre offset in part by reducing cost per H1 FY14 H1 FY15 add 17

Continued Investment in the network has lead to a significant drop in network downtime, one of the key Cost drivers of churn Volume savings Network Cost savings through MTTS including £217m £215m › Call volumes (down 24%) › Headcount 25.5% 24.9% › Engineers H1 FY15 H1 FY14 Expect FY overheads < FY13 (23.7%) 18

Investment in growth › 25,000 broadband net adds › 300,000 TV net adds Volume CPA £174m £153m › 64,000 mobile net adds › 101,000 fibre net adds CPA reduction › TV CPA down from £170 in H1 H1 FY15 H1 FY14 FY14 to £125 in H1 FY15 driven by Essentials and self install › BB, mobile and fibre CPA reduced through channel mix › 44% sales online (H1 FY15: 33%) 19

Acquisition spend: £3m for the Youview joint venture and £1m for the £74m £555m Yorkco joint venture £497m £44m £13m £4m £11m Dividend payment in line with our commitment and underlines our confidence in future growth prospects Higher interest cost than the prior year due to payment of facility fees for the 2.33x 2.25x new debt facility of £5.3m Net debt b/f Operating Exceptionals Acquisition & Interest & Dividend Net debt c/f Free share Tax Net debt to EBITDA ratio reduced to Cashflow repurchase 2.25x 20

£ million H1 FY15 H1 FY14 Cash outflow 11 8 Ethernet Settlement 0 (3) Making TalkTalk Simpler 11 11 P&L charge 9 8 Ethernet Settlement 0 (3) Making TalkTalk Simpler 9 9 Operating Efficiencies 0 2 H2 Cash exceptionals relating to Making TalkTalk Simpler and our acquisition of the Virgin Media National base are expected to be £19-£24m 21

Revenue growth accelerating to >4% for full year Profitability improving as benefits of revenue growth and reductions in operating costs and SAC flow through – on track to deliver 25% by FY17 Improvements in OFCF coupled with careful capex management provide confidence in continued Net Debt reduction 22

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Fibre to the Expand capacity Premise and utilisation Mobile Making TalkTalk Consumer quad play Simpler Business Data products TV for Everyone Grow Business Market Share 4% revenue CAGR and 25% EBITDA by FY17 24

96% population coverage – unbundling programme completed We will expand bandwidth by 50x-100x while holding capex to 6% of revenue £76m BT TalkTalk Saving Acquisition of Virgin Media’s National (DSL) off-net base Consumer £601 £419 £182 › 97,700 customers at 30 Sept 2014 Business £763 £227 £534 › Expect to migrate substantial proportion Unlimited broadband through calendar 2015 Saving based on contract length In advanced discussions to dispose of off- net base 25

Adding more TV customers than rest of market put together 80 % TV base gone from 16% to 33% of base Attracting new customers to TalkTalk – c25% of TV customers TV customers churn less than dual-play customers and are beginning to deliver 33 % incremental content ARPU › c£10 average ARPU (per customer taking paid content) On track for the vast majority of customers to take TV 26

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348k 64,000 net adds in half taking base 308k 284k to 348,000 260k 236k 202k 9.5% of unbundled base vs 6.9% a 175k 152k year ago 117k 85k Mobile customers continue to show lower churn and higher NPS Launched fully integrated Quad-Play Q1'13 Q2'13 Q3'13 Q4'13 Q1'14 Q2'14 Q3'14 Q4'14 Q1'15 Q2'15 bundles in October, saving customers over £200 vs Virgin Media 28