Sky News has learnt that a pre-pack administration that will involve the sale of TalkTalk’s wholesale and consumer arms to BT will be announced on Monday morning.
Sources said that as part of the deal BT had agreed to pay roughly £100m to Ares Management.
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KKR, the investment giant which acts as securitisation agent to TalkTalk, is also expected to receive a payment in the region of £60m, according to a person close to BT.
The deal will end the protracted uncertainty for Salford-based TalkTalk’s employees, with all 900 expected to transition across to BT as part of the deal.
However, it is likely to ignite fresh anger from across the industry given the concentration of BT’s market power that the deal will entrench.
TalkTalk was left with little option but to strike a deal with BT after the FTSE-100 company rejected a proposal from private equity firm Epiris relating to TalkTalk’s PXC division.
Epiris had asked BT to forego repayment of at least £300m owed by TalkTalk to BT’s Openreach subsidiary.
PXC typically pays between £60m and £80m every month to Openreach to lease its infrastructure, making it by far TalkTalk’s biggest supplier – with much of that funding in recent years having been the result of support from Ares via a letter of credit to BT.
The pre-pack administration will leave creditors owed hundreds of millions of pounds, which they are unlikely to recover.
Shareholders, including the founder Sir Charles Dunstone, will be wiped out.
Alvarez & Marsal (A&M), the restructuring firm, has been lined up to handle the insolvency process, which will come just over two decades after the company was founded by Sir Charles Dunstone.
TalkTalk’s fate has been hanging in the balance for weeks, with separate discussions taking place with potential buyers for its consumer arm, which serves more than 1.5 million customers, and PXC.
Insolvency practitioners at Alvarez & Marsal have been lined up to oversee TalkTalk’s administration, which would come just over two decades after the company was founded by Sir Charles Dunstone.
Ofcom and Lisa Nandy, the culture secretary, are being kept informed about the unfolding situation.
PXC serves thousands of vulnerable customers as well as hospitals, doctors’ surgeries and other areas of critical national infrastructure.
At the weekend, Tom O’Hagan, the PXC chairman who has been working with Epiris on its offer, warned that a BT takeover of TalkTalk’s network would reverse years of efforts to stimulate competition in Britain’s retail telecoms market.
Such a deal, he wrote in The Telegraph, “would create near-total dominance of an important part” of the sector.
As recently as eight days ago, TalkTalk had said that it was “in the final stages of its sales process for the [two] businesses and expects to conclude both transactions imminently.”
Sir Charles launched TalkTalk in 2004 with an audacious attempt to capture a big share of Britain’s retail telecoms market.
The company was floated on the London Stock Exchange in 2010, when it demerged from Carphone Warehouse, which Sir Charles also co-founded.
Its 2021 delisting took place at a valuation of about £2bn including debt.
The company has struggled for long periods since then, with cashflow difficulties – exacerbated by a haemorrhaging of its retail customer base – meaning the group’s valuation has shrunk significantly over the last five years.
TalkTalk declined to comment, while BT, Ares and A&M have been contacted for comment.
