Berenberg hangs up on TalkTalk amid ongoing uncertainty

“We believe Talks’ plan to improve margins significantly faces tough challenges, made more difficult by the recent cyber-crime attack,” said the bank.

Its central case expects that the company’s margins will reach around 15-16% in the mid- to long term, and Berenberg said that raises a serious question about Talk’s potential to continue with the dividend at the current level.

The bank’s own assumptions incorporate a 25% dividend cut in full year 2017 in order to achieve stability in net debt and keep net debt/EBITDA at about 2x.

The bank pointed out that it was not just reacting to the October cyber attack.

It said that even prior to that event, Talk’s operating trends were showing signs of weakness.

“Its retail broadband base shrank, and its total on-net base stagnated in the first half. Gross margins have been on a declining trend in the last two years, and the UK broadband competitive environment is presenting more challenges,” it said.

Combine this with the recent cyber attack and hopes for steady price increases, reducing churn, significant reductions in subscriber acquisition costs and a significant margin improvement seem optimistic, it said.

At 0900 GMT, TalkTalk shares were down 2.9% to 237p.