Goldman downgrades TalkTalk, says growth priced in

It said management's strategy to focus on growth over cash/returns is sensible given its relatively higher financial leverage. However, the current valuation - at 20-30% premiums versus the EU telco sector - suggests this return to growth is already priced in yet largely discounts an increasingly tough UK consumer market.

GS said TalkTalk's pricing differential is relatively limited compared to either discounted offers from BT or Vodafone.

"While we forecast Talk to return to modestly positive subscriber growth in FY18, near-term average revenue per user headwinds should persist…as the backbook continues to reprice although positively TALK has circa 60% of its on-net base in contract."

Goldman noted that TalkTalk is scaling back its mobile plans and has clearly cited it wants some pricing differential at the low end of the market in fixed. "We believe this presents a risk that Talk needs to further lower pricing in order to drive sustained subscriber growth," it said.

At 1108 BST, the shares were down 2.6% to 178.20p.