Shares in TalkTalk plunged by around 10% on Thursday after the company unveiled a £200m equity fund raising and slashed its dividend.
The UK-listed broadband provider wants to raise the funds to shore up its balance sheet and help pay for a new fibre network.
Along with cutting its dividend, TalkTalk also reduced its earnings target for 2018, which had previously been pared back as recently as November.
Shares were around 10% lower as at 1100 GMT, trading around 107p.
TalkTalk said it now anticipated full-year 2018 core earnings in the range of £230m to £245m, having earlier guided earnings at the bottom end of £270m to £300m.
“Looking ahead we see real opportunity to continue growing the core business whilst also investing in full fibre. We have therefore strengthened our balance sheet and temporarily reduced our dividend to take full advantage of the opportunities available,” said executive chairman Charles Dunstone.
TalkTalk revealed it had agreed a deal with infrastructure equity name Infracapital to establish an independent company that will create a full fibre network to over 3 million homes and businesses across the UK.
“By signing heads of terms with Infracapital we are making good progress towards putting TalkTalk at the heart of Britain's fibre future by building a full fibre network, bringing faster, more reliable internet to millions of homes and businesses,” added Dunstone.
The new company will be 80% funded by Infracapital and 20% by TalkTalk, in a potential equity investment of up to £500m.
TalkTalk will be a founding wholesale customer of the new company, providing a minimum volume commitment.
The broadband provider said the move built on the success of its full fibre trial in York, a network that currently reaches 14,000 homes and is in the process of being extended to 54,000.
TalkTalk also emphasised that its operating performance had improved over its fiscal third quarter, with the addition of 37,000 customers, a substantial increase on the prior two quarters´ figures.
Meanwhile, the dividend is to be temporarily reduced to 2.5p with a final dividend of 1.5p in the 2018 fiscal year, “consistent with new dividend policy.”
TalkTalk said the dividend would only return to a normalised 7.5p once it was satisfied that debt had been sufficiently reduced, targeting leverage at 2.0 x operating earnings.
“The outlook for next year is positive. We will see stabilising ARPU and strong customer growth consistent with FY18. We expect EBITDA growth of 15%, driven by the benefits of a bigger base, lower wholesale charges and significant cost reduction as we continue to radically simplify the business,” said chief executive Tristia Harrison.
TalkTalk shares have lost over 40% since the beginning of November.