talktalk telecom group plc
annual report 2011
wwwtalktalkgroupcom
talktalk telecom group plc annual report 2011 for more information visit 
wwwtalktalkgroupcom
talktalk telecom group plc
we are one of the leading fixed line  
voice and broadband telecommunications 
businesses in the uk we have over  
48 million customers
demerger from carphone warehouse
in march 2010 we demerged from the carphone  
warehouse group plc and listed on the london 
stock exchange as talktalk telecom group plc 
and are now a constituent of the ftse 250
directors’ report overview 01
financial highlights 01
what we do 04
chairman’s statement 06
chief executive officer’s statement 07
market overview 10
 
directors’ report performance review 12
business review 14
finance review 16
principal risks and uncertainties 20
corporate and social responsibility review 22
 
directors’ report governance 24
board and advisors 26
corporate governance 28
directors’ remuneration report 32
other statutory information 39
 
financial statements 40
statement of directors’ responsibilities 42
independent auditor’s report to the members  
of talktalk telecom group plc 43
consolidated income statement 44
consolidated statement of comprehensive income 45
consolidated statement of changes in equity 46
consolidated balance sheet 47
consolidated cash flow statement 48
notes to the consolidated financial statements 49
independent auditor’s report to the directors  
of talktalk telecom group plc 86
company balance sheet 87
company reconciliation of movement  
in shareholders’ funds 88
notes to the company financial statements 89
 
other information 94
five year record unaudited 96
glossary 97
shareholder information 98 overview performance review governance financial statements other information
revenue
47

2011
2010
£m
1765
1686
operating free cash flow
31

2011
2010
£m
119
156
headline earnings per share
24

2011
2010
pence
109
135
dividends per share
56
final
interim
pence
17
39
 
headline ebitda
25

2011
2010
£m
221
276
statutory profit before tax
100

2011
2010
£m
11
57
 
01
talktalk telecom group plc  annual report 2011
financial highlights
•	 we have had strong ebitda 
earnings and cash flow 
growth during a year of 
major change across 
the business
•	 we achieved our integration 
synergies run rate of £55m 
making good progress 
towards implementing 
our strategy
		 we	 use	 adjusted	 measures	 where	 measures	 are	 not	 defined	 under	 ifrs	 or	 ifrs	 numbers	 have	 been	 adjusted	
for	 details	 see	 page	 97 02 overview performance review governance financial statements other information
03
directors’ report
overview
what	we	do	 04
chairman’s	statement	 06
chief	executive	officer’s	statement	 07
market	overview	 10 largest
unbundled uk network
for	more	information	visit
wwwtalktalkgroupcom
04
talktalk telecom group plc  annual report 2011
what we do
over	 the	 past	 five	 years	 through	 a	 combination	 of	 organic	
growth	 and	 acquisitions	 we	 have	 built	 one	 of	 the	 uk’s	 largest	
broadband	 and	 voice	 customer	 bases	 during	 the	 year	 we	
completed	 the	 integration	 of	 the	 former	 tiscali	 business	 we	
had	 acquired	 in	 2009	 so	 that	 the	 majority	 of	 our	 base	 now	
comprises	 talktalk	 customers
we are the uk’s leading value for money 
provider of fixed line broadband and voice 
telephony services to consumers and 
business users
we	 serve	 over	 48	 million	 customers	 across	
the	 uk	 under	 the	 talktalk	 aol	 broadband	
and	 talktalk	 business	 brands	
how we are delivering value for money services for 
our customers
we	 operate	 the	 uk’s	 most	 extensive	 next	 generation	
network	 we	 use	 this	 advanced	 network	 to	 provide	 our	
customers	 with	 a	 range	 of	 clear	 consistent	 value	 for	
money	 broadband	 voice	 and	 associated	 services overview performance review governance financial statements other information
05
talktalk telecom group plc  annual report 2011
our consumer business
talktalk	 is	 strongly	 positioned	 as	 the	 value	 for	 money	
broadband	 and	 voice	 provider	 in	 the	 uk	 market	 we	 offer	 	
two	 straightforward	 compelling	 customer	 propositions
talktalk business
in	 january	 we	 rebranded	 our	 opal	 business	 to	 business	
operation	 as	 talktalk	 business	 to	 benefit	 from	 the	 strength	 	
of	 the	 talktalk	 brand	
our network
we	 have	 installed	 our	 own	 advanced	 equipment	 in	 more	 	
than	 2000	 of	 the	 uk’s	 local	 telephone	 exchanges	 which	 	
serve	 around	 86	 of	 the	 country’s	 households	 these	
exchanges	 are	 connected	 via	 our	 own	 high	 speed	 high	
capacity	 all	 ip	 national	 network	 enabling	 us	 to	 carry	 all	 	
of	 our	 customers’	 voice	 and	 data	 traffic	 efficiently	 and	 	
cost	 effectively	
this	 investment	 enables	 us	 to	 take	 control	 of	 the	 telephone	
line	 from	 the	 exchange	 to	 the	 customer’s	 premises	 on	 terms	
established	 by	 the	 telecoms	 regulator	 ofcom	 and	 to	 manage	
all	 of	 the	 voice	 and	 broadband	 services	 we	 provide	 over	 	
this	 line	
known	 as	 ‘local	 loop	 unbundling’	 this	 process	 brings	 major	
advantages	 for	 the	 customer	 such	 as	 optimised	 broadband	
speed	 and	 service	 quality	 and	 access	 to	 our	 growing	 range	 	
of	 additional	 products	 and	 services	 at	 the	 end	 of	 the	 year	
86	 of	 our	 customers	 were	 being	 served	 through	 our	 own	
network	 further	 unbundling	 to	 extend	 our	 network	 coverage	
to	 93	 of	 the	 uk’s	 households	 is	 central	 to	 our	 plans	 to	
continue	 growing	 our	 revenue	 and	 our	 profit	 margins
talktalk “essentials” talktalk “plus”
simply great value
£650
 free connection
 £1260 line rental a month
unlimited broadband 
and phone
£1450
 free connection
 £1260 line rental a month
office complete
your	 broadband	 landline
mobile	 and	 calls	 solution
more info more info
need a new
business line
connect	 to	 the	 uk’s	 largest
next	 generation	 network
in	 2011	 we	 launched	 three	 mobile	 products	 aimed	 at	 our	
customers	 seeking	 to	 reduce	 the	 costs	 of	 calling	 between	
family	 members	
in	 2012	 we	 plan	 to	 launch	 innovative	 value	 for	 money	 broadband	
based	 television	 services	 to	 our	 customers	 these	 will	 be	 built	
around	 youview	 a	 new	 technical	 standard	 for	 mass	 market	
television	 being	 developed	 by	 a	 joint	 venture	 that	 comprises	
talktalk	 and	 all	 the	 uk	 public	 service	 broadcasters	 including	
the	 bbc	 bt	 and	 arqiva
this	 business	 is	 a	 longestablished	 supplier	 of	 voice	 and	 data	
services	 to	 the	 small	 and	 medium	 sized	 enterprise	 market	
using	 our	 extensive	 low	 cost	 network	 infrastructure	 to	 deliver	
a	 wide	 range	 of	 propositions	 to	 these	 customers 06
talktalk telecom group plc  annual report 2011
chairman’s statement
the	 demerger	 of	 talktalk	 from	 carphone	 warehouse	 at	 the	
end	 of	 last	 year	 was	 designed	 to	 build	 value	 for	 shareholders	
by	 giving	 both	 companies	 the	 freedom	 focus	 and	 flexibility	 to	
develop	 and	 pursue	 the	 strategies	 that	 were	 right	 for	 each	 of	
them	 one	 year	 on	 there	 can	 be	 no	 doubt	 that	 the	 demerger	
has	 worked	 talktalk’s	 first	 year	 as	 a	 standalone	 company	 has	
been	 one	 of	 intense	 activity	 and	 we	 are	 delivering	 the	 benefits	
of	 our	 growth	 and	 scale	 reporting	 strong	 growth	 in	 earnings	
and	 operating	 free	 cash	 flow	
i	 have	 sometimes	 described	 talktalk’s	 acquisition	 of	 tiscali	 	
in	 2009	 as	 being	 like	 a	 snake	 swallowing	 a	 goat	 –	 prolonged	
sometimes	 painful	 but	 worth	 it	 in	 the	 end	 we	 started	 the	 	
year	 with	 our	 tiscali	 customers	 having	 been	 rebranded	 and	
moved	 onto	 talktalk	 tariffs	 but	 still	 on	 separate	 networks	 and	
separate	 billing	 systems	 through	 the	 course	 of	 the	 year	 we	
migrated	 almost	 all	 of	 them	 onto	 our	 own	 network	 and	 billing	
system	 this	 was	 an	 enormous	 and	 complex	 operation	 at	 the	
end	 of	 which	 we	 have	 a	 stronger	 integrated	 business	 that	 is	
ready	 to	 take	 the	 next	 big	 steps	 forward
the	 process	 of	 absorbing	 tiscali’s	 customers	 into	 talktalk	 	
was	 not	 always	 painless	 and	 some	 suffered	 disruption	 to	 	
their	 service	 we	 sometimes	 did	 not	 deal	 with	 these	 problems	
as	 well	 as	 we	 should	 have	 done	 and	 this	 resulted	 in	 some	
customers	 getting	 frustrated	 with	 us	 and	 leaving	 talktalk	
however	 i	 am	 certain	 that	 for	 those	 customers	 who	 stayed	
with	 talktalk	 and	 they	 are	 the	 vast	 majority	 the	 journey	 	
was	 worthwhile	 and	 they	 will	 now	 enjoy	 a	 consistently	 	
better	 customer	 experience	
the	 successful	 integration	 of	 tiscali	 has	 given	 us	 a	 strong	
base	 to	 build	 on	 but	 there	 is	 still	 a	 huge	 job	 to	 do	 to	 make	
talktalk	 more	 efficient	 and	 to	 give	 our	 customers	 an	 even	
better	 experience	 we	 are	 now	 implementing	 a	 new	 strategy	 	
to	 do	 this	 and	 to	 drive	 further	 revenue	 and	 profit	 growth	 	
this	 includes	 transforming	 the	 way	 we	 work	 expanding	
the	 coverage	 of	 our	 network	 and	 developing	 exciting	
new	 products	 and	 services	 for	 our	 customers
at	 the	 heart	 of	 talktalk	 is	 our	 commitment	 to	 be	 the	 uk’s	 best	
value	 for	 money	 provider	 of	 broadband	 voice	 and	 television	
services	 that	 commitment	 is	 now	 more	 important	 than	 ever	
consumers	 and	 businesses	 are	 still	 facing	 a	 difficult	 economic	
environment	 with	 budgets	 under	 pressure	 and	 likely	 to	 remain	
so	 for	 some	 time	 broadband	 is	 now	 an	 essential	 service	 and	
we	 will	 be	 absolutely	 true	 to	 our	 heritage	 of	 giving	 customers	
consistently	 the	 best	 value	 for	 money	 products	 in	 the	 market	
giving	 customers	 value	 is	 about	 more	 than	 offering	 them	 the	
lowest	 prices	 it	 is	 also	 about	 what	 they	 get	 for	 their	 money	
and	 we	 have	 now	 included	 our	 unique	 new	 homesafe	 service	
into	 all	 talktalk	 products	 parents	 are	 becoming	 increasingly	
concerned	 about	 what	 the	 internet	 can	 bring	 into	 their	 homes	
and	 homesafe	 allows	 them	 to	 control	 this	 effectively	 it	 also	
demonstrates	 how	 talktalk	 can	 use	 its	 advanced	 network	
technology	 to	 develop	 innovative	 services	 that	 customers	 want	
early	 next	 year	 we	 will	 be	 transforming	 our	 customers’	
television	 viewing	 experience	 uk	 households	 can	 currently	
choose	 between	 freeview	 the	 free	 basic	 multi	 channel	 	
tv	 service	 with	 limited	 functionality	 and	 high	 cost	 pay	 tv	
services	 offering	 an	 extensive	 range	 of	 content	 and	 functions	
youview	 from	 talktalk	 will	 bridge	 the	 gap	 between	 these	 two	
extremes	 customers	 will	 get	 all	 the	 freeview	 content	 they	 are	
used	 to	 but	 with	 advanced	 catch	 up	 and	 video	 on	 demand	
functions	 all	 integrated	 within	 a	 simple	 intuitive	 program	
menu	 and	 they	 will	 get	 all	 this	 in	 value	 for	 money	 packages	
that	 are	 just	 not	 available	 in	 the	 market	 now	
in	 this	 very	 active	 year	 we	 have	 mapped	 out	 our	 course	 for	 	
the	 next	 phase	 of	 talktalk’s	 development	 and	 taken	 some	
major	 steps	 forward	 to	 reflect	 this	 progress	 from	 the	 start	 	
of	 the	 2012	 financial	 year	 we	 intend	 to	 distribute	 50	 of	 	
our	 headline	 earnings	 per	 share	 as	 regular	 dividends
last	 year	 was	 a	 challenging	 one	 for	 our	 employees	 and	 	
on	 behalf	 of	 the	 board	 i	 would	 like	 to	 thank	 them	 all	 for	 	
their	 efforts	 and	 for	 their	 continuing	 commitment	 to	 	
talktalk	 and	 to	 our	 customers
“ this first year since our demerger has been one 
of intense activity for talktalk building a strong 
base on which we can offer an enhanced 
experience for all our customers and continue 
to grow our revenue and profitability”
charles dunstone 
chairman overview performance review governance financial statements other information
headline ebitda
25

2011
2010
£m
221
276
 
operating free cash flow
31

2011
2010
£m
119
156
 
07
talktalk telecom group plc  annual report 2011
chief executive officer’s statement
talktalk	 delivered	 a	 strong	 all	 round	 performance	 in	 a	 year	 of	
major	 change	 across	 the	 whole	 business	 in	 our	 first	 year	 as	 a	
stand	 alone	 company	 we	 added	 almost	 500k	 customers	 to	 our	
own	 network	 improved	 arpu	 by	 6	 grew	 headline	 ebitda	
by	 25	 and	 operating	 free	 cash	 flow	 by	 31
integration
our	 priority	 during	 the	 year	 was	 the	 integration	 of	 the	 former	
tiscali	 business	 this	 was	 a	 complex	 process	 that	 included	
transferring	 all	 former	 tiscali	 customers	 onto	 talktalk	 branded	
price	 plans	 moving	 them	 onto	 our	 email	 platform	 migrating	 	
a	 substantial	 majority	 of	 them	 onto	 our	 extended	 network	 	
and	 moving	 their	 billing	 details	 onto	 our	 upgraded	 billing	
system	 we	 successfully	 completed	 all	 the	 major	 elements	 	
of	 this	 program	 by	 the	 year	 end	 and	 delivered	 our	 run	 	
rate	 target	 of	 £55m	 of	 annual	 synergies	
during	 this	 process	 a	 number	 of	 customers	 suffered	 disruption	
which	 caused	 higher	 levels	 of	 complaints	 and	 churn	 and	 gave	
rise	 to	 a	 formal	 ofcom	 investigation	 we	 have	 worked	 hard	 to	
mitigate	 the	 impact	 of	 the	 disruption	 on	 our	 customers	 and	
to	 address	 the	 specific	 billing	 problem	 highlighted	 by	 ofcom	
which	 we	 believe	 has	 now	 been	 resolved	 as	 customers	 are	
migrated	 onto	 our	 own	 network	 and	 systems	 their	 experience	
improves	 significantly	 and	 churn	 reduces	
implementing our strategy
with	 42	 million	 broadband	 customers	 and	 the	 uk’s	 most	
extensive	 and	 most	 advanced	 ‘next	 generation	 network’	 our	
aim	 now	 is	 to	 realise	 the	 potential	 of	 this	 scale	 for	 the	 benefit	
of	 both	 customers	 and	 shareholders	 we	 therefore	 launched	 	
a	 new	 strategy	 in	 november	 and	 have	 made	 good	 progress	
implementing	 this	
the	 strategy	 is	 focused	 around	 five	 areas	 and	 aims	 to	 deliver	
our	 mediumterm	 financial	 objectives	 of	 20	 headline	 ebitda	
margin	 and	 2	 revenue	 cagr
“ this was a strong all round performance in  
a year of major change across the business 
we have made good progress implementing 
our strategy by extending our network driving 
operating efficiencies and offering customers 
consistently best value for money services”
dido harding 
chief	executive	officer 08
talktalk telecom group plc  annual report 2011
chief executive officer’s statement
continued
1 extending our network
we	 ended	 the	 year	 with	 our	 own	 advanced	 equipment	 in	 2007	
of	 the	 uk’s	 local	 telephone	 exchanges	 covering	 over	 86	 of	
the	 country’s	 households	 these	 unbundled	 exchanges	 are	
linked	 to	 our	 core	 national	 next	 generation	 network	 by	 our	
high	 capacity	 low	 cost	 backhaul	 circuits	 this	 all	 ip	 network	
enables	 us	 to	 manage	 multiple	 services	 efficiently	 control	
service	 quality	 and	 develop	 new	 services	 rapidly	 and	
cost	 effectively
unbundling	 delivers	 substantial	 benefits	 including	 higher	
arpu	 and	 lower	 churn	 across	 the	 customer	 base	 access	 to	
inbound	 call	 termination	 revenue	 lower	 regulated	 charges	
and	 lower	 backhaul	 costs	 migrating	 our	 customers	 onto	 our	
network	 delivers	 a	 better	 experience	 for	 our	 customers	 the	
opportunity	 to	 offer	 them	 more	 products	 and	 a	 rapid	 return	 	
on	 the	 investment	
we	 are	 now	 extending	 our	 network	 by	 unbundling	 a	 further	
700	 exchanges	 this	 will	 bring	 our	 coverage	 up	 to	 93	 of	 the	
uk’s	 households	 and	 with	 2700	 unbundled	 exchanges	 our	
aim	 is	 to	 serve	 93	 of	 our	 customers	 on	 our	 own	 network	
2 improving operating efficiency and effectiveness
our	 target	 is	 to	 generate	 £4050m	 of	 operating	 efficiencies	
over	 the	 mediumterm	 by	 simplifying	 our	 business	 processes	
eliminating	 duplication	 and	 in	 doing	 so	 deliver	 a	 better	 service	
to	 our	 customers	
towards	 the	 end	 of	 the	 year	 we	 launched	 a	 major	 organisation	
restructuring	 that	 will	 generate	 £25m	 of	 operating	 efficiencies	
annually	 changes	 include	 integrating	 all	 our	 technology	 and	 	
it	 capabilities	 into	 one	 organisation	 and	 streamlining	 all	 our	
non	 customer	 facing	 business	 operations	 these	 changes	
will	 also	 greatly	 improve	 the	 quality	 of	 the	 end	 to	 end	
experience	 we	 deliver	 to	 our	 customers	 which	 will	 enable	
us	 to	 address	 customer	 services	 issues	 and	 start	 to	 reduce	
our	 overall	 customer	 service	 costs	
3 delivering value for money quad play services
we	 are	 committed	 to	 providing	 an	 expanding	 range	 of	 clear	
value	 for	 money	 services	 for	 our	 customers	 more	 of	 our	
customers	 now	 take	 both	 broadband	 and	 voice	 services	 and	
more	 also	 opt	 for	 our	 higher	 value	 “plus”	 product	 which	 now	
makes	 up	 14	 of	 our	 total	 base	 we	 aim	 to	 drive	 this	 customer	
mix	 improvement	 further	 and	 introduce	 more	 “boosts”	 which	
give	 customers	 extra	 value	 and	 billing	 certainty	
talktalk	 is	 all	 about	 giving	 customers	 consistently	 the	 best	 value	
for	 money	 experience	 in	 the	 market	 and	 we	 have	 reinforced	
this	 commitment	 by	 recently	 reducing	 the	 headline	 price	 of	
our	 essentials	 and	 “plus”	 products	 for	 all	 our	 customers	 taking	
either	 of	 these	 products	
value	 for	 money	 is	 not	 just	 about	 price	 it	 is	 also	 about	
what	 customers	 get	 for	 their	 money	 and	 we	 have	 now	
added	 our	 new	 free	 homesafe	 option	 to	 our	 essentials	 and	
plus	 propositions	 homesafe	 is	 the	 uk’s	 first	 networklevel	
security	 product	 which	 works	 by	 filtering	 a	 customer’s	
broadband	 before	 it	 enters	 the	 premises	 it	 allows	 parents	
to	 decide	 what	 internet	 content	 they	 want	 to	 come	 into	 their	
home	 and	 protects	 every	 internet	 device	 in	 the	 household	
we	 have	 extended	 our	 product	 range	 by	 offering	 great	
value	 mobile	 services	 for	 our	 existing	 customers	 aimed	
at	 families	 seeking	 to	 reduce	 the	 costs	 of	 calling	 between	
family	 members	 and	 we	 now	 plan	 to	 extend	 the	 range	 of	
our		 mobile	 offers
the	 next	 major	 milestone	 in	 the	 implementation	 of	 our	
quad	 play	 strategy	 will	 be	 the	 launch	 of	 an	 innovative	 value	
for	 money	 television	 service	 to	 our	 customers	 this	 will	 be	
built	 around	 youview	 a	 new	 open	 technical	 standard	 for	
mass	 market	 television	 being	 developed	 by	 a	 joint	 venture	
that	 includes	 talktalk	 and	 all	 the	 uk	 public	 service	
broadcasters	 including	 the	 bbc	 bt	 and	 arqiva
homesafe
exclusively	available	to	talktalk	
customers	 free	 of	 charge	 homesafe	
provides	 unique	 network	 level	 safety	
and	 security	 for	 all	 devices	 using	
the	internet	connection	in	the	
home	including	games	consoles	
and	smart	phones	the	parental	
control	features	including	
homework	time	help	parents	
make	choices	about	how	to	keep	
their	families	safer	online overview performance review governance financial statements other information
for	more	information	visit
wwwtalktalkgroupcom
09
talktalk telecom group plc  annual report 2011
always better value
the	services	talktalk	provides	are	
at	the	very	heart	of	our	homes	and	
we	believe	they	should	be	available	
to	everyone	this	belief	defines	our	
commitment	 to	 always	 better	 value	
because	 always	 better	 value	 means	
a	brighter	home	for	everyone
youview	 will	 bring	 to	 our	 customers	 all	 the	 ‘plug	 in	 and	 watch’	
simplicity	 they	 are	 used	 to	 combined	 with	 the	 uk’s	 leading	
catch	 up	 and	 video	 on	 demand	 services	 all	 instantly	 available	
through	 one	 simple	 intuitive	 settop	 box	 our	 customers’	 on	
screen	 program	 guide	 will	 go	 backwards	 in	 time	 as	 well	 as	
forwards	 for	 the	 first	 time	 allowing	 them	 to	 discover	 and	 watch	
great	 programs	 whenever	 they	 want	 including	 a	 choice	 of	 pay	
tv	 channels	 and	 on	 demand	 programs	 youview	 from	 talktalk	
will	 be	 in	 trial	 by	 the	 end	 of	 2011	 with	 a	 full	 consumer	 launch	
planned	 for	 spring	 2012
4 growing our range of data services for businesses
we	 are	 using	 our	 next	 generation	 network	 to	 develop	 	
new	 services	 to	 exploit	 the	 growth	 of	 business	 data	 traffic	
these	 include	 products	 based	 on	 ethernet	 a	 technology	 	
that	 delivers	 symmetrical	 uncontended	 fast	 access	 that	 is	
displacing	 high	 cost	 legacy	 leased	 line	 products	 we	 aim	 	
to	 grow	 our	 wholesale	 carrier	 grade	 ethernet	 connectivity	
propositions	 for	 large	 operators	 supplying	 the	 enterprise	
market	 as	 well	 as	 copperbased	 ‘ethernet	 first	 mile’	 	
solutions	 for	 the	 mid	 market	
5 offering fibre access 
we	 are	 making	 delivery	 of	 our	 services	 future	 proof	 	
and	 meeting	 potential	 customer	 demand	 for	 high	 speed	
broadband	 by	 developing	 our	 ‘next	 generation	 access’	
capabilities	 we	 have	 launched	 a	 fibre	 optic	 “boost”	
product	 and	 are	 working	 with	 bt	 openreach	 to	 develop	
this	 further	 and	 in	 particular	 to	 improve	 the	 customer	
connection	 experience	 and	 reduce	 costs	
our	 other	 fibre	 initiatives	 include	 a	 shared	 research	 and	
development	 project	 with	 bskyb	 to	 deploy	 a	 small	 scale	 	
‘fibre	 to	 the	 home’	 network	 to	 3600	 homes	 in	 north	
west	 london	 and	 active	 support	 for	 fujitsu	 as	 it	 seeks	
access	 to	 government	 funds	 earmarked	 for	 investment	
in	 superfast	 broadband	 in	 rural	 communities
brighter basics
successful	 delivery	 of	 our	 strategy	 is	 not	 just	 about	 what	 we	
plan	 to	 do	 it’s	 also	 about	 how	 we	 do	 it	 the	 way	 people	 work	
together	 and	 the	 culture	 we	 develop	 is	 a	 crucial	 element	
to	 our	 success	 through	 the	 course	 of	 this	 year	 we	 have	
developed	 our	 brighter	 basics	 –	 five	 core	 values	 that	 define	
what	 kind	 of	 team	 we	 aspire	 to	 be	 they	 define	 our	 aspirations	
as	 a	 way	 of	 daily	 life	 they	 capture	 what	 makes	 talktalk	 unique	
and	 will	 guide	 us	 in	 implementing	 our	 plans	 to	 make	 talktalk	
a	 brighter	 place	 for	 everyone onnet base
2011
2010
million
3110
3607
percentage of customers onnet
2011
2010

74
86
 
10
talktalk telecom group plc  annual report 2011
market overview
at the end of december 2010 there 
were 195 million household broadband 
connections in the uk 39 more than 
at the same time the previous year it is 
estimated that more than 75 of uk 
households now have a fixed line 
broadband connection
the	 uk	 has	 one	 of	 the	 most	 competitive	 and	 innovative	
telecommunications	 markets	 in	 europe	 with	 consumers	 and	
businesses	 still	 facing	 a	 tough	 economic	 environment	
and	 budgets	 under	 pressure	 talktalk	 is	 clearly	 positioned	 as	
a	 value	 for	 money	 provider	 with	 a	 strong	 appeal	 to	 customers	
seeking	 the	 best	 value	 offers	 for	 what	 is	 now	 an	 essential	
household	 and	 business	 service
fixed line broadband
with	 42	 million	 fixed	 line	 broadband	 customers	 talktalk’s	
market	 share	 at	 the	 end	 of	 december	 2010	 was	 215	
bt	 retail	 was	 the	 largest	 broadband	 service	 provider	 with	 a	
277	 market	 share	 the	 other	 large	 scale	 service	 providers	
were	 virgin	 media	 and	 bskyb
215

talktalk market share at december 2010
473

talktalk share of unbundled market
unbundled broadband
at	 the	 end	 of	 march	 2011	 there	 were	 76	 million	 unbundled	
broadband	 lines	 in	 the	 uk	 talktalk	 was	 the	 largest	 unbundler	
with	 36	 million	 lines	 473	 of	 the	 total	 uk	 market	 and	 a	 total	
of	 2007	 local	 exchanges	 unbundled overview performance review governance financial statements other information
11
talktalk telecom group plc  annual report 2011
uk telecoms regulation
the uk telecoms market is regulated 
by ofcom which sets the charges for 
wholesale access to infrastructure 
and associated services owned by 
bt openreach where bt is deemed 
to enjoy ‘significant market power’
other regulation 
other significant areas of current 
or potential legislation for talktalk 
digital economy act
this	 act	 was	 enacted	 in	 2010	 and	
requires	 internet	 service	 providers	 to	
send	 notifications	 to	 customers	 whose	
connections	 have	 been	 identified	 as	
being	 used	 for	 illegal	 file	 sharing	 the	
act	 includes	 reserve	 powers	 to	 require	
the	 isp	 to	 disconnect	 these	 customers	
talktalk	 along	 with	 bt	 was	 given	
permission	 for	 a	 judicial	 review	 of	 these	
provisions	 of	 the	 act	 on	 five	 grounds	
in	 a	 judgment	 handed	 down	 in	
april	 2011	 the	 majority	 of	 the	 challenge	
was	 rejected	 an	 appeal	 is	 currently	
being	 considered
in	 parallel	 the	 government	 is	 considering	
whether	 there	 should	 be	 a	 requirement	
on	 isps	 to	 block	 certain	 websites	 that	
promote	 illegal	 file	 sharing	 and	 whether	
such	 a	 scheme	 should	 be	 voluntary	
or	 compulsory	
net neutrality 
a	 number	 of	 parties	 have	 lobbied	 vocally	
at	 national	 and	 eu	 level	 for	 the	 introduction	
of	 rules	 to	 prevent	 certain	 forms	 of	 data	
traffic	 management	 by	 isps	 however	
the	 eu	 the	 uk	 government	 and	 ofcom	
all	 appear	 to	 be	 committed	 currently	 to	
allow	 market	 transparency	 and	 competition	
to	 protect	 consumers’	 interests	 rather	
than	 prescriptive	 regulation	
fttc	 fibre	to	the	cabinet
gea	 generic	ethernet	access
isp	 internet	service	provider
llu	 local	loop	unbundling
mpf		 full	unbundling	
nga	 next	generation	access
rpi	 retail	price	index
smpf	 partial	unbundling
wlr	 wholesale	line	rental
llu charges
a	 consultation	 is	 currently	 in	 progress	
to	 establish	 the	 level	 of	 bt	 openreach	
charges	 for	 llu	 for	 the	 period	 until	
30	 march	 2014	 this	 consultation	 covers	
mpf	 smpf	 and	 wlr	 charges	 and	 takes	
account	 of	 a	 range	 of	 factors	 including	
bt	 openreach’s	 cost	 of	 capital	 the	
value	 of	 the	 local	 loop	 infrastructure	
for	 regulatory	 purposes	 and	 potential	
efficiency	 gains	 ofcom’s	 mid	 case	
proposals	 based	 on	 update	 published	
on	 18	 may	 2011	 are	 for	 mpf	 prices	
to	 change	 to	 rpi	 minus	 27	 and	 rpi	
minus	 46	 for	 wlr	 a	 final	 decision	
on	 the	 new	 charges	 is	 expected	 in	
autumn	 2011
ipstream charges
this	 covers	 the	 charge	 control	 for	
bt’s	 wholesale	 broadband	 services	
of	 which	 ipstream	 is	 the	 most	 relevant	
being	 the	 service	 used	 in	 areas	 that	 are	
outside	 talktalk’s	 unbundled	 network	
footprint	 ofcom’s	 market	 review	 in	
2010	 established	 that	 there	 should	 be	
a	 charge	 control	 for	 ipstream	 covering	
the	 12	 of	 the	 population	 located	 in	
the	 most	 rural	 least	 competitive	 areas	
of	 the	 market	 a	 consultation	 process	
on	 the	 actual	 charge	 levels	 is	 now	 in	
progress	 and	 ofcom’s	 initial	 proposal	
is	 that	 this	 should	 be	 based	 on	 a	 mid	
case	 of	 rpi	 minus	 13
next generation access
bt	 openreach’s	 nga	 infrastructure	
currently	 mainly	 comprising	 its	 fttc	
network	 is	 now	 being	 rolled	 out	 bt	
openreach	 is	 required	 to	 offer	 a	 wholesale	
nga	 product	 on	 equivalent	 terms	 and	
conditions	 for	 all	 communications	 providers	
at	 present	 it	 is	 not	 subject	 to	 formal	 price	
controls	 the	 current	 wholesale	 product	
is	 gea	 which	 talktalk	 is	 using	 to	
provide	 customers	 with	 its	 fibre	 optic	
“boost”	 product	 the	 development	
of	 this	 product	 further	 is	 the	 subject	 of	
discussions	 between	 talktalk	 bt	
openreach	 and	 ofcom	 aiming	 to	
improve	 the	 customer	 experience	 and	
to	 make	 its	 economics	 more	 attractive	
for	 providers	 and	 customers
ofcom’s objective is to ensure fair 
competition in the market so that 
consumers and businesses benefit 
from a choice of services and service 
providers	 three areas regulated by 
ofcom are most material for talktalk 12 overview performance review governance financial statements other information
13
directors’ report
performance review
business review 14
finance review 16
principal risks and uncertainties  20
corporate and social responsibility review 22 14
talktalk telecom group plc  annual report 2011
business review
overview
the group delivered a strong performance in its first year as  
a standalone entity generating material growth in profitability 
headline ebit up 27 and cash generation operating free 
cash flow up 31 our customer base has remained broadly 
flat during the year as we have focused the business on 
unbundling taking the percentage of customers on our network 
from 74 to 86 and growing arpu on our broadband base 
6 from £236 in q4 2010 to £250 in q4 2011 substantially 
completing the integration program has delivered significant 
margin improvement in the second half of the year and we exit 
the year with the full benefit of £55m integration synergies 
included in our ebitda run rate as this increase in profitability 
flows through to operating free cash flow we continue to deliver 
on our commitment to cash growth
all figures presented within the business review are presented 
on a headline basis as this is the way in which management 
reviews the business our statutory results are presented in 
the finance review
customer base and arpu
2011 2010
growth 
decline
broadband k 4199 4197 2
nonbroadband k 678 999 319
onnet base k 3607 3110 497
of which
mpf base k 2751 2211 540
smpf base k 856 899 43
offnet base k 592 1087 495
arpu q4 2011 q4 2010
broadband £250 £236 59
nonbroadband £177 £218 188
broadband customer base and arpu
the onnet customer base grew 16 to 3607 million as 
86 of our new customers are fully unbundled and we have 
migrated customers from ipstream and data stream during 
the course of the year this was offset by a decline in the 
offnet customer base
higher customer churn during the year was mainly 
concentrated among offnet and smpf customers who  
were subject to significant disturbance through the migration 
process and have a higher broadband price than our fully 
unbundled customers the 540k increase in the number  
of fully unbundled customers was broadly offset by the 43k 
decline in the partially unbundled base and 495k decline  
in the offnet base with the total broadband base ending  
flat year on year at 42 million
talktalk continued to acquire new broadband and voice 
customers during the year our higher value “plus” product  
sold well accounting for 14 of the total base at the year  
end compared to less than 5 at the start of the year the 
proportion of fully unbundled broadband and voice customers 
increased from 53 of the total broadband base at the start  
of the year to 66 at the year end this improved customer  
mix was one of the main drivers of the 6 growth in broadband 
arpu from £236 in q4 2010 to £250 in q4 2011
the unbundled estate increased by 265 exchanges to 2007  
at the year end covering 86 of households the network 
expansion was completed ahead of plan which enabled us  
to accelerate the customer migration schedule the migration  
of customers onto our own network therefore slowed 
substantially in the fourth quarter as the next wave of new 
unbundled exchanges start to come on stream early in the 
current year the pace of migrations will accelerate again
nonbroadband customer base and arpu
the nonbroadband base consists primarily of voice only 
customers and declined to 678k at the year end from 999k  
at the end of the previous year as customers continue to take 
both phone and broadband services nonbroadband arpu 
also declined from £218 at the start of the year to £177 at  
the year end due to the reduction in fixed line usage
headline financial statements information
£m 2011 2010
growth
decline
broadband 1247 1086 148
nonbroadband 189 273 308
corporate 329 327 06
total revenue 1765 1686 47
ebitda 276 221 249
ebitda margin 156 131
depreciation and amortisation 84 70
ebit 192 151 272
includes share of results of joint venture
revenue
our revenue is principally derived from the provision of voice 
and broadband services a customer is treated as a broadband 
customer where they receive broadband and where relevant 
voice and mobile services a customer is classified as 
nonbroadband where they do not take broadband and receive 
voice only or narrowband services our revenue is a function 
of the mix of services received by the customer and the 
size of the relevant customer base arpu is an indicator of 
the average value of the services we supply to each customer 
corporate revenue represents revenue generated by talktalk 
business in the provision of voice and data services to 
corporate customers and resellers overview performance review governance financial statements other information
15
talktalk telecom group plc  annual report 2011
revenue increased by 47 to £1765m 2010  £1686m 
reflecting growth in our broadband revenue together with  
the full year effect of the tiscali acquisition nonbroadband 
revenue fell during the year as expected excluding the effect 
of the disposal of our fixed line businesses in ireland and 
belgium at the beginning of the year our underlying revenue 
grew by 57
revenue from our broadband business increased 148  
year on year to £1247m 2010  £1086m reflecting the 
increasing arpu throughout the year and higher customer 
base in the first half of the year
as we continue to upsell our nonbroadband customer base to 
take both phone and broadband services the revenue from this 
base reduced to £189m 2010  £273m we disposed of our 
belgium and ireland fixed line voice businesses at the beginning 
of the year accounting for £16m of the revenue reduction
revenue from our corporate services was broadly flat at 
£329m 2010  £327m as reduction in fixed line usage in 
our voice products has been offset by growth in both data 
services and carrier services and the full year effect of tiscali
headline profit
headline ebitda grew by 249 to £276m 2010  £221m 
and ebitda margin improved to 156 from 131 last year 
this reflected the margin enhancement from the integration 
program the full year effect of tiscali performance and  
the growth in our broadband business 
the integration program has been substantially completed 
and has delivered overall synergy benefits of £40m in the year 
including the benefit of access migrations and savings from 
the elimination of backhaul and other network duplication  
and consolidation of systems and processes 
our headline ebit increased by 272 to £192m 2010  £151m 
resulting from the improvement in ebitda offset by an increase 
in depreciation and amortisation resulting from our continued 
investment in exchange roll out and billing systems
operating free cash flow and net debt
£m 2011 2010 growth
headline ebitda 276 221 249
working capital 10 2
capex 110 100
operating free cash flow 156 119 311
net debt 438 508
the group grew operating free cash flow in the year to £156m 
2010  £119m an increase of 311 on the prior year reflecting 
the significant improvement in ebitda in the year we have 
continued to control our investment in capital expenditure in 
line with our guidance to focus on delivering our unbundling 
strategy and unified billing system as a result of our cash 
generation net debt reduced by £70m to £438m 2010  £508m
outlook
talktalk is the uk’s leading value for money broadband and 
voice provider and we are well positioned in the tougher 
environment that both consumers and businesses are  
now facing household and business budgets remain under 
pressure and our clear consistent value for money approach 
will continue to appeal strongly to customers seeking the  
best value offers for what is now an essential service
talktalk has grown rapidly and achieved substantial scale and 
we are confident that we can execute our strategy successfully 
and continue to deliver strong sustainable profit and cash 
flow growth to reflect this from the start of the 2012 financial 
year onwards the board intends to pay out 50 of headline 
earnings per share as regular dividends
2012 financial guidance
•  revenue broadly flat 
broadband revenue growth is expected to be offset by  
a continuing decline in nonbroadband revenues with  
talktalk business revenue expected to be broadly flat 
 
we expect to add 200k – 250k onnet broadband customers 
during the year and to see a similar level of offnet customer 
loss momentum is expected to build through the year  
as churn comes down and we expect to exit the year with 
positive broadband customer net additions leaving the  
base broadly flat over the year with further unbundling 
improving the customer mix and driving higher arpu 
•  ebitda margin 170 – 180 
the ebitda margin will benefit from customer mix a full 
year of tiscali integration synergies adding an incremental 
£15m to the £40m of synergies benefits captured in 2011 
and over half of the £25m operating efficiencies generated 
by the restructuring program offset by additional investment 
in customer growth  
 
the increase in our ebitda margin is expected to be 
weighted towards the second half of the year mainly 
reflecting the phasing of the restructuring program
• earnings per share 155 – 165p
•  capex 6 of total revenue 
capital expenditure is expected to be broadly flat year 
on year equivalent to approximately 6 of total revenue 
as we continue to invest in our llu roll out and in the 
network and systems capabilities needed to scale new 
products and services
• operating free cash flow 10 – 11 of total revenue
• exceptional cash spend £25m – £30m
  16
talktalk telecom group plc  annual report 2011
finance review
reconciliation of headline to statutory information
income statement 
 
£m 2011 2010 growth
revenue 1765 1686 47
gross margin 888 848 47
operating expenses excluding 
amortisation and depreciation 612 627
headline ebitda 276 221 249
exceptional items  
– one company
2
36 47
exceptional items  
– operating efficiency
2
12 –
ebitda 228 174 310
depreciation and amortisation 
operating
1
84 70
exceptional
2
7 5
non operating amortisation
2
62 83
operating profit 75 16 100
finance costs 18 5
profit before taxation 57 11 100
taxation 22 14
profit loss for the year 35 3 100
1 includes share of results of joint ventures
2 excluded from headline results
revenue
revenue increased by 47 to £1765m 2010  £1686m 
reflecting growth in our broadband revenue together with  
the full year effect of the tiscali acquisition nonbroadband 
revenue fell during the year as expected excluding the effect 
of the disposal of our fixed line businesses in ireland and 
belgium at the beginning of the year our underlying revenue 
grew by 57
gross margin
gross margin for the year was £888m 2010  £848m which 
represents a flat year on year margin of 503 2010  503 
the decline in nonbroadband and usage together with 
the impact of regulatory price increases was offset by the 
improved contribution from product mix the benefits of our 
one company access migrations and the margin accretive 
effect of tiscali
operating expenses
our operating expenses in the year improved by £15m from 
£627m in the prior year to £612m this reflects the benefits  
of our integration program primarily on our network and it 
costs and a focus on effective cost control within management 
overheads offset by the full year effect of tiscali
exceptional items
investment in our one company integration program was 
£43m for the year comprising £36m of operating expense and 
£7m of asset write downs this included network integration 
costs principally in relation to the decommissioning of the 
legacy tiscali network and consolidation and replacement to 
create a higher capacity network certain costs relating to the 
migration of talktalk aol and tiscali customers onto our core 
billing system and the integration project teams responsible 
for delivery
as a result of acquisitions in prior years the number of legal 
entities in the group’s structure has been increasing as part 
of the integration program an entity rationalisation program 
was undertaken to achieve a more dividend efficient and 
cost effective structure this has included the liquidation of a 
number of both uk and overseas entities which in the current 
year has resulted in the recycling of £4m of translation 
reserves to the income statement as an exceptional credit 
following our restructure program and the disposal of our 
belgian and irish businesses at the beginning of the year 
we have no overseas trading entities
on 26 january 2011 a restructure of the group was announced 
to improve the operating efficiency of the company and to 
generate annualised cost savings of approximately £25m 
the consultation with employees was completed ahead of 
the year end and as a result a charge has been recognised 
in the income statement in relation to the provision of 
redundancy and associated costs totalling £12m
ebitda
ebitda after exceptional items has grown by 310 to  
£228m 2010  £174m exceptional costs within ebitda are 
comparable on a year on year basis at £48m 2010  £47m 
and are discussed above the improvement in ebitda 
principally reflects the benefits of the integration program 
together with an additional quarter of tiscali and growth 
in broadband revenues
amortisation of acquisition intangibles
the amortisation charge in respect of acquisition intangibles 
amounted to £62m 2010  £83m the reduction reflects 
the full amortisation of certain aol acquisition intangibles 
in the prior year partially offset by the full year effect of the  
tiscali acquisition
profit before taxation
statutory profit before taxation grew over five fold to £57m  
2010  £11m this reflected the significant increase in 
headline earnings decrease in non operating amortisation 
partially offset by the increase in finance costs resulting  
from the debt structure post demerger overview performance review governance financial statements other information
basic eps
24

2011
2010
pence
109
135
17
talktalk telecom group plc  annual report 2011
earnings per share 
 
2011 2010 growth
headline earnings £m 122 106 151
basic eps 135p 118p 144
diluted eps 128p 112p 143
headline earnings on a ‘proforma 
standalone’ basis £m 122 98 245
basic eps 135p 109p 239
diluted eps 128p 103p 243
statutory earnings £m 35 3
basic eps 39p 03p
diluted eps 37p 03p
in order to provide a meaningful comparison and to remove 
the distortion of exceptional items earnings per share is 
provided on a headline basis as well as a statutory basis  
a full reconciliation of headline to statutory results can be 
found in note nine to the financial statements
in addition due to the significant change in debt structure  
post demerger eps is also shown on a ‘proforma standalone’ 
basis the standalone basis assumes a similar year on year 
debt structure and adjusts the prior year interest charge 
accordingly this has the effect of increasing interest by  
£11m which tax effected reduces earnings by £8m
headline earnings per share on a standalone basis grew  
by 239 to 135p 2010  109p statutory eps was 39p 
2010  03p reflecting the group’s statutory profit for the 
year basic eps was calculated based on a weighted average 
number of shares of 907 million 2010  898 million dilution 
of 45 million shares 2010  50 million has been applied for 
the purposes of calculating diluted eps resulting from 
employee share option plans the details of which can  
be found in note five to the financial statements
cash flow and net debt 
 
£m 2011 2010 growth
headline ebitda 276 221 249
working capital 10 2
capex 110 100
operating free cash flow 156 119 311
exceptional items – one company 43 20
exceptional items – demerger 16 –
acquisitions and disposals
1
7 239
dividends paid 15 251
interest and taxation 19 5
cash flow relating to demerger – 54
net cash flow 70 450
opening net debt
2
508 58
closing net debt
2
438 508
1 includes sundry items of £2m including foreign exchange onnet debt
2 including loans to related parties net debt was £436m 2010  £505m
capital expenditure 
capital expenditure in the year was £110m 2010  £100m 
representing 62 of revenue 2010  59 during the year 
we grew our network by unbundling a further 265 exchanges 
and building out partial unbundling into our entire estate to 
allow us to migrate the tiscali broadband only customers onto 
our own network we expanded our internal billing capability 
to be able to manage all residential customers on one core 
billing system during the year and migrated substantially all 
of our customers with the pipex customer base planned for 
migration during the 2012 financial year
working capital
the working capital outflow of £10m 2010  £2m was primarily 
due to the integration of the tiscali business including the 
alignment of certain tiscali creditors and initial unwind of 
fair value provisions
exceptional and demerger costs
exceptional cash spend associated with the one company 
integration program totalling £43m was incurred in the 
year together with spend of £16m on demerger costs 
acquisitions and disposals
total cash inflow in relation to acquisitions was £5m 
comprising a £14m adjustment for the tiscali acquisition  
offset by small strategic business to business acquisitions 
and a payment of £5m in relation to our investment in the 
youview joint venture the sale of our irish and belgian 
fixed line operations resulted in the receipt of proceeds 
of £4m in the year  statutory profit before tax
100

2011
2010
£m
11
57
18
talktalk telecom group plc  annual report 2011
finance review
continued
acquisitions and disposals continued
the final purchase price agreement of tiscali of £14m in 
relation to working capital and customer numbers together 
with the finalisation of the deferred consideration for the 
acquisition of uk telco of £1m occurred in the year 
as both acquisitions were made prior to 1 april 2010 
the provisions of ifrs3 2004 apply and as a result an 
adjustment has been made which has reduced goodwill 
by £15m this is disclosed in note 29 to the financial 
statements and the prior year balance sheet has been 
restated accordingly
dividends
our current policy is to increase the dividend payment broadly 
in line with growth in our headline earnings per share 
dividends paid in the year of £15m comprised the 
interim dividend of 17p per share which was paid 
on 17 december 2010
the board has declared a final dividend of 39p per share 
which will be paid subject to shareholder approval  
on 5 august 2011 for shareholders on the register at 
8 july 2011 the total declared dividend for the year was 
56 pence which provides dividend cover of 24 times
to reflect the cash generation profile of the group our 
dividend policy from the 2012 financial year will be to return 
to our shareholders 50 of our basic headline earnings 
per share in the form of ordinary dividends
net debt 
net cash inflow was £70m 2010  net cash outflow 
of £450m net debt including loans to related parties 
was £436m 2010  £505m excluding loans to related  
parties net debt was £438m 2010  £508m
taxation and treasury
2011 2010
£m headline statutory headline statutory
operating profit 192 75 151 16
interest 18 18 4 5
profit before taxation 174 57 147 11
taxation 52 22 41 14
profit loss for the year 122 35 106 3
headline tax rate 30 28
interest
net interest costs charged to the income statement were 
£18m 2010  £5m reflecting the capital structure of the 
group post demerger the blended interest rate charge on  
the debt was 307 net interest paid in the year increased  
to £17m 2010  £3m broadly in line with the charge in the 
income statement
taxation 
the effective headline tax rate for the year was 30 2010  28 
representing a tax charge of £52m 2010  £41m on headline 
profit before tax of £174m 2010  £147m although the group 
had minimal disallowable expenses in the year the rate is 
slightly ahead of the statutory corporation tax rate as the tax 
charge reflects the impact of the reduction in corporation 
tax rates enacted in the year on our deferred tax assets
the reduction in corporation tax rate from 28 to 26 created 
a charge through the income statement of £9m resulting from 
the downward revaluation of deferred tax assets this has been 
partly offset by a prior year adjustment of £5m relating to the 
recognition of additional tax losses and capital allowances 
the tax charge for the year on statutory earnings for the year 
was £22m 2010  £14m the principal differences between 
the tax charge and the standard rate of corporation tax are the 
impact of the reduction in corporation tax rate and a small 
element of disallowable exceptional spend offset by the £5m 
prior year adjustment
there have been tax payments in the year of £2m 2010  £2m 
which relate to the final corporation tax assessment of our aol 
luxembourg entity prior to its liquidation overview performance review governance financial statements other information
net debt
2011
2010
508
438
£m
19
talktalk telecom group plc  annual report 2011
funding
the group’s operations are financed by committed bank 
facilities retained profits and equity during the year the group 
was able to make use of overdrafts and some uncommitted 
facilities to assist with working capital management funding  
of our subsidiaries is arranged centrally with an emphasis  
on efficient cash management all funding in the group is 
provided on an arms length basis the group’s committed 
bank facilities comprise a £550m revolving credit facility  
used for working capital purposes and a term loan of £100m 
the revolving credit facility matures in march 2013 whilst 
the term loan matures in march 2015 the terms of both 
the facilities are similar and the covenants are identical 
the  group was in compliance with the covenant conditions 
on both facilities at the year end as at 31 march 2011 £395m  
had been drawn down on these combined facilities it is  
the group’s policy to refinance its facilities significantly  
in advance of maturity dates
policy
the group is exposed to limited cross border transactional 
commitments but where significant these are hedged at 
inception using forward currency contracts the group treasury 
function operates within the framework approved by the board 
in line with best practice to ensure effective management of  
the group’s interest and foreign exchange risk
capital structure
the board reviews the capital structure of the group on an 
annual basis and as discussed in note 19 to the financial 
statements considers that the mediumterm target gearing  
for the group is 75 to 100
in the first year as a standalone company significant 
progress has been made towards this target with gearing 
as at 31 march 2011 of 106
accounting developments
the group has early adopted ias 24 2009 ‘related party 
disclosures’ in the preparation of these financial statements 
the standard simplifies the definition of a related party with 
a shared person or entity no longer automatically implying  
the existence of a related party relationship the impact of the 
adoption of this standard is that following the demerger of the 
group best buy europe and carphone warehouse group plc 
are no longer considered to be related parties note 28 to the 
financial statements discloses our related party relationships
the adoption of other standards in the year as disclosed in 
note 1 to the financial statements has had no material effect 
in the current financial year
 
going concern
the directors have acknowledged the guidance ‘going concern 
and liquidity risk guidance for directors of uk companies 
2009’ published by the financial reporting council in 
october 2009 
the group’s business activities together with the factors likely 
to affect its future development performance and position 
are set out in the chief executive officer’s statement on pages 
7 to 9 and business review on pages 14 to 15 the financial 
position of the group its cash flows and borrowing facilities 
are described within this finance review in addition note 19 
in the financial statements describes how the group manages 
financial risk including foreign exchange risk interest rate risk 
credit and liquidity risk 
whilst the current economic climate remains uncertain  
the breadth of our customer base our value for money 
proposition improved operating efficiency and the largest 
unbundled network in the uk together with our development 
of a competitive quad play offering means that the directors 
are confident of the group’s ability to continue to compete 
effectively in the uk telecommunications sector
the group has £650m of committed credit facilities and as  
at 31 march 2011 the headroom on these facilities was £255m 
the group’s forecasts and projections taking into account 
reasonably possible changes in trading performance indicate 
that there is sufficient headroom on our facilities and that this 
together with our market positioning means that the group is 
well placed to manage its business risks successfully and has 
adequate resources to continue in operational existence for the 
foreseeable future the directors have therefore adopted 
the going concern basis of accounting in preparing the 
financial statements 20
talktalk telecom group plc  annual report 2011
principal risks  
and uncertainties
in common with other organisations we are affected 
by a number of risks not all of which are in our control 
some risks such as uk macroeconomic factors are likely 
to affect the performance of uk businesses generally 
while others are particular to our operations this section 
sets out the material risks to the group and how we seek 
to mitigate them in the day to day running of our business
risk area potential impact mitigation
1
competitive environment
increased competition in the uk 
broadband market may impact  
financial performance
we regularly monitor the product  
offerings of key competitors in the  
market this results in an ongoing  
review of the customer proposition  
and the overall value of our products
2
regulatory environment 
changes in regulated prices  
can significantly impact the  
group’s performance
we actively participate in the pricing 
discussions had by ofcom including 
the use of independent experts to 
provide assistance and evidence 
as required
3
network reliability
failure to provide a reliable service  
causes customer churn
we focus continually on improving 
network resilience and performance  
and continue to invest to ensure 
we keep pace with customers 
growing demands 
4
change management
we are undertaking a significant  
change to our organisational structure  
at the start of the 2012 financial year 
disruption to business operations 
and back office functions may impact 
financial performance 
we have a group change forum 
comprised of senior managers which  
is responsible for centrally monitoring 
group wide change
teams are established to run the 
component projects of the overall 
change with clear plans in place 
for each area regular progress 
reports are provided to ensure 
key dates are met
5
fibre access technology
demand for fibre access could  
grow significantly before a wholesale 
product with acceptable economics 
is available for the group to market  
to customers
the group is working with openreach  
to develop fibre products which incur 
lower set up and provisioning costs 
there is close liaison with ofcom to 
ensure there is regulatory support for 
development of fibre products suitable 
for mass market adoption overview performance review governance financial statements other information
for more information visit
wwwtalktalkgroupcom
21
talktalk telecom group plc  annual report 2011
risk area potential impact mitigation
6
data integrity and security
loss of customer data could lead  
to data protection breaches causing  
damage to our reputation and fines
the group continually reviews its  
data security and implements new 
solutions as they become available
7
ofcom
during the year we have had 
a notification from ofcom of 
contravention of general condition 11 
under section 94 of the communication 
act 2003 ofcom may issue a penalty 
to the group under this act
the executive team continues to work 
closely with ofcom to demonstrate that 
the group is taking appropriate action  
to remedy the issues which led to  
the notification from ofcom of the 
contravention of general condition  
11 under section 94 of the 
communications act
in addition the group has established  
a compliance committee chaired by  
the senior independent director john 
gildersleeve this committee monitors 
the level of and reason for customer 
complaints and ensures appropriate 
remedial action is taken
8
television
provision of television services  
could become a more important  
driver of competitive advantage 
in the broadband market
the group is part of the youview joint 
venture along with the bbc and other 
parties which is developing a television 
service which includes internet based 
catch up and video on demand services
9
end to end process and controls
failure to operate effective processes 
across the group may lead to customer 
churn and noncompliance with 
regulatory requirements
a group wide project was started  
during the year project sunshine  
to document review and improve  
the end to end processes in the  
group this project is key to driving 
joined up processes across the  
group and improving our  
customers’ experience
the group’s compliance committee 
regularly monitors the level and  
reason for customer complaints 22
talktalk telecom group plc  annual report 2011
corporate and social responsibility review
leading the way on digital inclusion  
employee engagement and sustainability
talktalk plays a pivotal role in helping over 48 million consumer 
and business customers to connect communicate and thrive  
in the digital age we’ve always been active in the communities 
in which we operate and this year we’ve given our activities  
more structure and clearer targets so we can more easily track 
and share our achievements our corporate responsibility 
program is built around three themes where we believe  
we can make the biggest difference – digital inclusion the 
environment and employee engagement
1 digital inclusion 
the internet connects and entertains educates and informs –  
it even saves us money yet nine million people in the uk have 
never been online and over four million of those are socially 
excluded due to age unemployment or income and this group 
will become increasingly isolated as more public and private 
services move online that’s why we support and run a number 
of initiatives to help communities to bridge the digital divide
•  race online 2012 
led by the uk’s digital champion martha lane fox race 
online calls on people to inspire encourage and support 
the uk’s digitally excluded to take their first steps online 
benefits to the uk are forecast to total £22 billion while 
households can save £560 per year
1
 talktalk was one of 
the founding partners and has pledged to contribute by 
getting 100000 more people online by the start of the 
london 2012 olympics through education training and 
awards programs
•  talktalk digital champions 
our employees share their internet know how in their local 
communities our start up kits give them ideas to take to 
anyone they think would benefit from being online – from  
their grandparents to local charities uptake has been 
impressive with nearly 200 staff signing up in the first  
week in april 2011 alone 
•  talktalk brighter futures  
we aim to get 1000 more families in brent online during 
the 2011 calendar year by working with the local education 
authority to deliver esafety training alongside free and 
discounted broadband and telephone packages in the 
north west we offer free connections and hardware via 
schools in salford and we’re the lead partner in go on 
liverpool the campaign to help socially and digitally 
excluded adults and children in the city
2 environment
we will continually improve our environmental performance  
by using sustainable resources promoting efficiencies and 
innovation throughout our business and products and 
encouraging our suppliers to do the same our energy use  
per gb of bandwidth use has fallen over a three year period 
leading to our achievement of the carbon saver standard 
our target is to further reduce our carbon footprint by 25 by 
2021 based on gb use of broadband services and to inspire 
our employees and customers to lead a greener life and help 
us to reduce our environmental impact on the world we share
we will reduce our carbon footprint and waste by focusing on
• energy
• building materials
• appliances
• water
• ventilations
• travel
• refuse
this year we have been included in the ftse4good index 
the leading global responsible investment index and won 
several awards we have also received a breeam
2
 “excellent” 
accreditation for our west london headquarters 
3 employee engagement 
employees
our people are central to the success of talktalk and we have 
embarked on a program to make the business “a brighter 
place for everyone” we want our people to feel included 
respected and most importantly enjoy their jobs and be 
passionate about the great culture we share within our work 
environment we want to recognise our people for doing 
great work and helping to drive our business forward
brighter basics
our brighter basics are a set of values and benefits that 
capture our personality and unique identity as a company 
they define our aspirations as a way of every day life at work 
and reach out into our personal lives and our communities 
brighter basics are described on page 9
digital hero awards
these annual awards reward 
outstanding individuals who use 
digital technology to bring about 
positive social change in 2010 
entrants from the 12 uk regions 
received over 140000 public votes 
between them the 12 regional 
winners were invited to the 
house of lords where they 
received bursaries to fund both 
new and existing projects overview performance review governance financial statements other information
for more information visit
wwwtalktalkgroupcom
23
talktalk telecom group plc  annual report 2011
engagement
our pulse engagement surveys are a regular way of 
information gathering on the views of our people across  
a variety of topics employee engagement the extent to  
which employees are psychologically and emotionally  
attached to their work positively influences customer 
satisfaction and productivity our last survey results  
registered an engagement score of 74
managers receive engagement data with feedback regarding 
their teams this information includes a summary with key 
items highlighted in order to enable them to work with their 
teams to improve engagement
communication
keeping our people informed of developments and the 
company’s progress whilst enabling them to engage in two 
way communication has been a strong feature this year at 
talktalk ‘dido’s blog’ has become a weekly personalised 
account of the chief executive officer’s experiences with key 
messages to the talktalk community employees are free to 
post their comments on the blog anonymously should they 
prefer not to include their details this is reinforced by ‘team 
talk’ a weekly set of messages designed to enable managers 
to share information with their teams in a consistent manner
our ‘all hands’ events bring the chief executive officer 
senior management and every single person in the company 
including our outsource service providers at call centres in 
south africa india and the philippines together twice a year 
to get to hear and participate in key messages around the 
company’s half year and full year performance and results
employee forum
we have a national employee forum and five local employee 
forums that provide an important basis for communication 
and consultation on business change matters meetings are 
held at least quarterly and deal with site based issues raised 
through our employee representatives and the local 
management team right through to national matters across 
the uk and ireland these forums are integral to disseminating 
information and gathering feedback on matters such as 
legislative changes employment levels and people development
involvement and recognition
annual recognition schemes continue across the group  
such as “talktalk heroes” in our business to business area 
recognising teams and individual performance is an important 
feature of our culture by acknowledging those who have  
gone the extra mile for the customer or their colleagues 
recognition has included our ability to invite xfactor acts  
to our sites to perform for our staff and to enable our people 
to apply for free tickets to attend xfactor shows through 
participation in competitions the opportunity to be part of 
britain’s biggest tv show is a very popular initiative at talktalk
employee benefits
we were able to extend our comprehensive range of benefits 
during the year to include saveasyouearn schemes in the 
uk and ireland enabling employees to participate in the 
performance of the company
during the year we were delighted to be able to offer our 
employees in the uk free broadband and an equivalent 
benefit for our people in ireland
we believe that we can make a big difference in our communities 
by inspiring our 3900 employees to get involved new projects 
for the calendar year 2011 include give something back the 
opportunity for staff to take a paid day of leave to take part in 
volunteering or fundraising activities in their local community 
our employees continue to work with our company charity 
ambitious about autism and its incredible work to support 
young people with autism autism is a lifelong condition that 
affects communication social understanding and behaviour  
in 1 in 100 people talktalk sponsors talkaboutautismorguk 
where professionals and parents are encouraged to talk  
more about autism and share knowledge and experiences  
to achieve the best educational outcomes for autistic children 
in 2011 we celebrated a remarkable milestone raising a total 
of £1m over the eight years we’ve partnered ambitious about 
autism and their treehouse school 
through these and other initiatives we aim to use our position 
to engage empower and support the communities around us 
1 ‘the economic case for digital inclusion’ october 2009 pwc
2 the most widely used environmental assessment method for buildings
liverpool family concerts
we support the worldrenowned 
royal liverpool philharmonic 
orchestra through our sponsorship 
of their family series employee 
champions at our warrington  
irlam and preston sites made  
sure that over 1200 of our staff  
and customers enjoyed free 
concerts at philharmonic hall 24 overview performance review governance financial statements other information overview performance review governance financial statements other information
25
directors’ report
governance
board and advisors 26
corporate governance 28
directors’ remuneration report 32
other statutory information 38 26
talktalk telecom group plc  annual report 2011
board and advisors
john gildersleeve 
senior independent nonexecutive director
introduction
the board is committed to the highest standards of corporate 
governance and in accordance with the listing rules of the uk 
listing authority the board confirms that except to the extent 
stated below the company has throughout the year and as 
at the date of this annual report complied with the provisions 
set out in section 1 of the combined code on corporate 
governance published by the uk financial reporting council 
‘frc’ in june 2008 ‘code’
this section of the annual report together with the directors’ 
report and directors’ remuneration report provide details  
of how the company has applied the principles and complied 
with the provisions of the code
uk corporate governance code
on 28 may 2010 the frc published a new uk corporate 
governance code ‘new code’ to replace the code the new 
code applies to reporting periods beginning on or after 
29 june 2010 it will therefore apply to the company for the 
2012 financial year and not the financial year covered by 
this report 
the board has however initially reviewed the new code and 
has decided to voluntarily adopt the following principles ahead 
of the implementation of the new code first all directors 
will stand for reappointment annually at the company’s annual 
general meeting ‘agm’ starting from the 2011 meeting 
second the performance of the board will be externally 
facilitated at least every three years with the first review to 
be carried out no later than during the 2014 financial year 
board balance and independence
the board has nine members four of which excluding the 
chairman and deputy chairman are considered independent 
nonexecutive directors these are john gildersleeve our 
senior independent director john allwood brent hoberman 
and ian west jessica burley was also an independent 
nonexecutive director during the period until she stood  
down on 16 november 2010 ian west was appointed a 
nonexecutive director on 8 february 2011 roger taylor  
the deputy chairman is not considered independent given  
he was previously chief financial officer of the carphone 
warehouse group plc from the which the company was 
demerged in march 2010
the chairman and executive directors have service contracts 
that can be terminated by either the company or the director 
on 12 months notice
the nonexecutive directors have three year periods of 
appointment all the independent directors have a three 
month notice period with no compensation for loss of  
office roger taylor has a six month notice period
points of noncompliance with the code
this is the first annual report of the company since the demerger 
and as stated in the company’s prospectus issued as part 
of the demerger as published on the company’s website 
wwwtalktalkgroupcom charles dunstone chairman was 
not independent on his appointment due to the fact that he 
was previously chief executive officer of cpw and also has a 
significant shareholding in the company the board believes 
that the appointment of charles as chairman benefited the 
group given that charles was both the founder of cpw in 
which the company was created and his knowledge of the 
market place is important to its future development major 
shareholders were also consulted prior to his appointment  overview performance review governance financial statements other information
27
talktalk telecom group plc  annual report 2011
at least half of the board excluding the chairman are independent 
and this has been the situation for all of the financial year 
except for between 16 november 2010 and 8 february 2011 
following the resignation of jessica burley and prior to the 
appointment of ian west during this short period the board 
believed that there was sufficient independence on the board 
still to enable the other independent nonexecutive directors 
to influence appropriately and challenge any board decisions 
how the board operates
the board has reserved certain matters and delegated 
others to the group’s executive committee which comprises 
dido harding chief executive officer amy stirling chief 
financial officer david goldie group commercial director 
and other senior employees drawn from across the group 
reserved matters include approving the group’s strategy 
annual budgets and other longer term planning 
the board had six formal meetings during the year as well  
as other meetings as were appropriate for approving certain 
announcements to shareholders all directors attended 
each of the meetings during the period save for roger taylor  
absent from the meeting on 30 september 2010 due to a prior 
arranged meeting david goldie absent from the meeting on 
27 july 2010 due to annual leave jessica burley who attended 
all meetings until her resignation on 16 november 2010 and 
ian west who attended the sole remaining meeting following 
his appointment on 8 february 2011
it is important to the board that nonexecutive directors  
have the ability to influence and challenge appropriately  
to this end all nonexecutive directors are given a thorough 
induction to the group and take priority in board discussions 
all directors receive papers in advance of meetings they  
also receive regular reports and members of the group’s 
executive team are invited to present at board meetings so 
that the nonexecutive directors form a good knowledge 
of how the group operates 
the chairman meets regularly with just the nonexecutive 
directors usually in the evening prior to every other board 
meeting this ensures that any concerns can be raised and 
discussed outside of formal board meetings the senior 
independent director also attends these sessions where it  
is also possible if required to discuss any matters with the 
other independent nonexecutive directors
as stated below the board has also delegated certain matters 
to a number of board committees
it is important to the group that all directors understand 
external views of the group to this end regular reports are 
provided to the board by the group’s investor relations 
director covering broker reports and the output of 
meetings with significant shareholders 
performance evaluation and continued development
the board has not been subject to a formal external 
evaluation during the course of the year as it is the board’s 
first year of operation since the demerger of the group 
each board member has been subject to an internal 
performance review during the year where the balance  
of skills knowledge and experience of each director was 
reviewed this was undertaken by each member of the  
board completing detailed questionnaires the results of  
these were analysed by the chairman senior independent 
director and the board as a whole
as part of the performance review the ability of each director 
in particular the nonexecutive directors to demonstrate the 
required time commitment to the role was assessed
as a result of this performance evaluation the chairman confirms 
that each of the directors seeking reelection at the agm 
continues to be effective and has demonstrated the appropriate 
commitment to the role
the senior independent director also met with the other 
nonexecutive directors to assess the chairman’s effectiveness 
taking into account the views of executive directors 
the company secretary ensures that the board is made aware 
of new laws regulations and other information appropriate to 
the group to ensure that all directors continually update their 
skills and knowledge and familiarity of the group in order to 
fulfil their roles additionally each director has access to the 
advice and services of the company secretary and also has 
the ability to take independent external advice if required 28
talktalk telecom group plc  annual report 2011
corporate governance
amy stirling 41
skills and experience amy has been the chief 
financial officer of talktalk since 2006 having 
been with the carphone warehouse since 2000 
amy has played a key role in the management and 
integration of the significant businesses acquired 
by talktalk over the past six years 
external appointments amy has no external 
director appointments
dido harding 43
skills and experience dido joined talktalk 
in february 2010 prior to that date dido was 
sainsbury’s convenience director having been 
appointed to sainsbury’s operating board in  
march 2008 dido joined sainsbury’s from tesco 
plc where she held a variety of senior roles 
external appointments dido is a nonexecutive 
director of the british land company plc
charles dunstone 46
skills and experience charles founded the 
carphone warehouse and created talktalk  
in 2002 since that date he has directed the 
development of talktalk to become one of  
the leading fixed line telecommunication 
businesses in the uk 
roger taylor 46
skills and experience roger was chief financial 
officer of carphone warehouse from january 
2000 and played a key role in the creation and 
growth of its group including talktalk 
external appointments roger is also chief executive 
officer of carphone warehouse group plc
john allwood 59
skills and experience john was the chief 
operating officer and latterly group finance 
director of mecom group plc and prior to this  
he was managing director of telegraph media 
group ltd chief executive of orange uk and  
of mirror group plc 
external appointments john is a member of 
exeter university council and a nonexecutive 
director of carphone warehouse group plc
principal bankers
barclays plc 
hsbc bank plc 
ing bank nv 
royal bank of scotland group plc
advisors 
corporate brokers
credit suisse europe ltd  
1 cabot square london e14 4qj
barclays capital  
5 the north colonnade  
canary wharf london e14 4bb
registrar 
equiniti limited  
aspect house spencer house  
lancing west sussex bn99 6gu
david goldie 47
skills and experience david joined talktalk when 
the opal business was acquired by carphone 
warehouse in 2002 david has over 25 year’s 
experience in the telecommunications industry 
and has been instrumental in the establishment 
and growth of the group 
external appointments david holds a nonexecutive 
role at the fulwood academy and is also a 
board member of the northwest regional 
development agency
ian west 47
skills and experience ian has been involved in 
the telecoms and media sector for over 20 years 
he was at bskyb for 11 years and held various 
roles including managing director of the 
subscription business and also managed the 
introduction of sky digitalsince he left in 2000 
he cofounded top up tv in 2003 
external appointments ian is a supervisory board 
member of kabel deutschland
company secretary
tim morris
john gildersleeve 66
skills and experience john was an executive 
director of tesco plc and joined the board 
of carphone warehouse in june 2000 before 
becoming chairman in july 2005 
external appointments john is a nonexecutive 
director of carphone warehouse group plc 
and the british land company plc
brent hoberman 42
skills and experience brent cofounded
lastminutecom in 1998 and was their chief 
executive officer until it was sold in 2005 
brent has subsequently founded and is 
chairman of mydeco and madecom 
external appointments brent is governor of 
the university of the arts college london and a 
nonexecutive director of guardian media group 
and timeout group brent also cofounded 
profounders capital which is an early stage 
digital venture fund
auditor
deloitte llp  
2 new street square  
london ec4a 3bz
chairman
executives
nonexecutives
external appointments charles is chairman of the 
prince’s trust chairman of carphone warehouse 
group plc and a nonexecutive director of both 
the daily mail and general trust plc and 
independent media distribution plc overview performance review governance financial statements other information
29
talktalk telecom group plc  annual report 2011
•  make recommendations to the board in relation to the 
appointment reappointment and removal of the external 
auditor and to approve their remunerations and terms  
of engagement
•  review and monitor the external auditor’s independence 
and objectivity and the effectiveness of the audit process 
taking into consideration relevant uk professional and 
regulatory requirements and 
•  review the company’s policy on the engagement of the 
external auditor to supply non audit services in this 
context the committee’s remit requires it to report to  
the board identifying any matters in respect of which it 
considers that action or improvement is needed and to 
make recommendations as to the steps to be taken 
in light of the assessments and review undertaken the 
committee recommended to the board that deloitte llp be 
retained as auditor of the company this recommendation 
was endorsed by the board 
the policy relating to the provision of non audit services by  
the external auditor specifies the types of work from which 
the external auditor’s are excluded for which the external 
auditor can be engaged without referral to the committee 
and for which a case by case decision is required in order 
to safeguard the auditor’s objectivity and independence  
the ratio of non audit fees to audit fees is monitored by the 
committee any work proposed in excess of fifty percent  
of the audit fee is referred to the committee amounts below 
this are discussed with the chairman of the committee
a statement of fees paid or accrued for services from the 
external auditor during the period is set out below 
£m 2011 2010
fees payable to the company’s  
auditor for the audit of the  
company’s annual accounts 01 01
audit of the group and its subsidiaries 
pursuant to legislation 07 06
audit services provided  
to all group companies 08 07
reporting in respect of capital  
market transactions – 18
other assurance services – 18
taxation services 01 04
other services 01 02
all other services 02 06
total group auditor’s remuneration 10 31
board committees 
the board has established four committees audit remuneration 
nomination and compliance the first three as required by the 
code the fourth to ensure the compliance of the group within 
the regulatory environment in which it operates
audit committee 
the committee currently comprises the following independent 
nonexecutive directors john allwood chairman 
john gildersleeve and ian west jessica burley was also 
a member during the financial year up until her resignation 
on 16 november 2010 john allwood is the member with 
the recent and relevant financial experience see directors’ 
biographies roger taylor is also a member but for the 
reason stated above is not considered independent all 
of the committee members have extensive commercial 
experience the committee met formally three times during 
the year all members attended each meeting although only 
one meeting took place after the appointment of ian west 
there were no committee meetings between the date of 
jessica burley’s resignation and ian west’s appointment 
the chairman of the committee updates the board on any 
significant issues that may have arisen at the board meeting 
following each committee meeting during the year all 
requirements of the code in respect of the committee were 
met the work undertaken by the committee is described 
within the following sections of this report the group’s 
chief financial officer and other senior management attend 
the committee meetings by invitation of the committee 
representatives of the company’s external auditor and other 
senior executives from finance tax and treasury legal and 
business assurance also attend these meetings by invitation 
of the committee the external and internal auditors have 
direct access to the committee during formal meetings and 
time is set aside for them to have private discussion with the 
committee in the absence of management attendees 
during the period the formal calendar of items considered  
at each audit committee meeting within each annual cycle 
embraced the code requirements to 
•  monitor the integrity of the financial statements of the 
company and any formal announcements relating to 
the company’s financial performance including reviewing 
significant financial reporting judgements contained in them 
•  review the company’s internal financial controls and  
its internal control and risk management systems and  
to make recommendations to the board
•  review the company’s arrangements by which employees 
may raise concerns in confidence
•  monitor and review the effectiveness of the company’s 
internal audit function  30
talktalk telecom group plc  annual report 2011
corporate governance 
continued
certain non audit services are preapproved by the 
committee depending upon the nature and size of the service 
tax services principally comprise technical advice associated 
with relevant uk and international fiscal laws and regulations 
and in particular assessment of the potential implications 
of proposed corporate transactions or restructuring other 
services principally represent advice provided and project 
management support received for the set up of the group’s 
finance shared service function having undertaken a review  
of the non audit related work the committee has satisfied 
itself that the services undertaken during the year did  
not prejudice the external auditor’s independence 
at each of its meetings the committee reviewed and considered 
reports on risk and business assurance on the status of the 
group’s risk management systems findings from the internal 
audit function concerning internal controls and reports on the 
status of any weaknesses in internal controls identified by 
the internal or external auditor
the chairman of the committee updates the board following 
each committee meeting
the committee’s terms of reference which are available on 
request from the company secretary and are published on the 
group’s website wwwtalktalkgroupcom comply with the code 
remuneration committee
the committee currently comprises the following independent 
nonexecutive directors john gildersleeve chairman 
brent hoberman and ian west roger taylor is also a member 
of the committee but for the reasons stated in this report 
he is not considered independent jessica burley was also a 
member during the financial year up until her resignation on 
16 november 2010 after which john allwood took her place 
on an interim basis prior to the appointment of ian west
the committee met formally three times during the period 
and each member attended every meeting save for roger 
taylor who did not attend the meeting on 27 january 2011 
because of a prior engagement other directors including 
the chief executive officer the company secretary the 
group director of human resources and advisors attended 
by invitation of the committee a detailed description of the 
committee’s remit and work during the period is contained 
in the remuneration report on pages 32 to 38
the chairman of the committee updates the board following 
each committee meeting 
the committee’s terms of reference which are available 
on request from the company secretary and are published on 
the group’s website wwwtalktalkgroupcom comply with 
the code
nomination committee
during the year the committee comprised the following 
nonexecutive directors john gildersleeve chairman 
roger taylor and ian west jessica burley was also a member 
during the financial year up until her resignation in november 
2010 after which john allwood took her place on an interim 
basis the committee met once during the year in january 
2011 and each member attended that meeting
the committee is responsible for succession planning  
at board level overseeing the selection and appointment  
of directors regularly reviewing the structure size and 
composition of the board and making its recommendations  
to the board it assists in evaluating the commitments of 
individual directors and the balance of skills knowledge  
and experience on the board in this regard it proposed  
the appointment of ian west following the resignation of 
jessica burley
the chairman of the committee updates the board following 
each committee meeting
the committee’s terms of reference which are available on 
request from the company secretary and are published on the 
group’s website wwwtalktalkgroupcom comply with the code 
regulatory compliance committee
the members of this committee are john gildersleeve 
chairman dido harding chief executive officer david 
goldie group commercial director tim morris company 
secretary and other senior executives of the group there 
were four formal meetings of the committee during the year
the purpose of the committee is to provide the board with 
visibility of how the group remains compliant with those 
regulations affecting its businesses from time to time its 
members therefore include those senior executives who  
are operationally responsible for implementing permanent 
changes necessary to ensure the group remains compliant 
such members are accountable to the committee and the 
board for the successful delivery of such changes
this committee now meets ahead of each formal board 
meeting and other meetings are scheduled at other times 
depending on those regulatory matters currently affecting  
the group
risk management and internal control
the company has established a risk management program 
that assists management throughout the company to identify 
assess and mitigate business financial operational and 
compliance risks the board views management of risk as 
integral to good business practice the program is designed 
to support management’s decision making and to improve 
the reliability of business performance  overview performance review governance financial statements other information
for more information visit
wwwtalktalkgroupcom
31
talktalk telecom group plc  annual report 2011
the risk management program is supported by the business 
assurance and internal audit functions 
to ensure that all parts of the group have a good 
understanding of risk members of this team have conducted 
risk workshops and reviews within each of the main functions 
in the past year culminating in an assessment of key business 
risks by the executive directors and key management 
these risk assessments have been wide ranging covering 
risks arising from the regulatory environment strategy counter 
parties and organisational change associated both with major 
projects and acquisitions the risk management process 
operates throughout the group being applied equally to 
the main business units and corporate functions a risk 
report and update is provided at each board and audit 
committee meeting
the output of each assessment is a list of key strategic 
financial operational and compliance risks associated action 
plans and controls to mitigate them are also put in place 
where this is possible and to the extent considered appropriate 
by the board taking account of costs and benefits changes in 
the status of the key risks and changes to the risk matrix are 
reported regularly at each board meeting
the directors have overall responsibility for the group’s system 
of internal controls and for reviewing their effectiveness the 
board delegates to executive management the responsibility 
for designing operating and monitoring these systems the 
systems are based on a process of identifying evaluating 
and managing key risks and include the risk management 
processes set out above
the systems of internal control were in place throughout the 
year and up to the date of approval of the annual report and 
financial statements the effectiveness of these systems is 
periodically reviewed by the audit committee in accordance 
with the revised guidance in the turnbull report these systems 
are also refined as necessary to meet changes in the group’s 
business and associated risks the systems of internal control 
are designed to manage rather than eliminate the risk of failure 
to achieve business objectives they can only provide reasonable 
and not absolute assurance against material errors losses 
fraud or breaches of law and regulations 
the board has conducted an annual review of the effectiveness 
of the systems of risk management and internal controls in 
operation during the year and up to the date of the approval 
of the annual report and financial statements and this was 
approved by the audit committee and the board
this is supported by an ongoing process for identifying 
evaluating and managing the risks faced by the group  
by the business assurance and internal audit functions
auditor
deloitte llp were appointed on incorporation and have 
expressed their willingness to continue in office as the 
auditor and a resolution to reappoint them will be proposed 
at the forthcoming agm 
communication with investors
the board believes it is important to explain business 
developments and financial results to the company’s 
shareholders and to understand any shareholder concerns 
the principal communication media used to impart 
information to shareholders are news releases including 
results announcements and company publications in all  
such communications care is taken to ensure that no price 
sensitive information is released
the chief executive officer and chief financial officer have 
lead responsibility for investor relations they are supported  
by a dedicated investor relations director who amongst other 
matters organises presentations for analysts and institutional 
investors there is a full program of regular dialogue with 
major institutional shareholders fund managers analysts  
retail brokers and credit investors upon which the chairman 
ensures that the board receives regular updates at board 
meetings the board also receives periodic reports on 
investors’ views of the performance of the company all the 
nonexecutive directors and in particular the chairman and 
senior independent director are available to meet with major 
shareholders if such meetings are required the company 
plans also to communicate with shareholders through the 
agm at which the chairman will give an account of the 
progress of the business over the last year and a review of 
current issues and provides the opportunity for shareholders 
to ask questions
further financial and business information is available on the 
group’s website wwwtalktalkgroupcom 32
talktalk telecom group plc  annual report 2011
directors’ remuneration report
introduction
this remuneration report has been prepared in accordance 
with the large and medium sized companies and groups 
accounts and reports regulations 2008 ‘regulations’ 
issued under the companies act 2006 ‘act’ and the 
combined code on corporate governance published by  
the uk frc in june 2008 the constitution and operation 
of the remuneration committee are in compliance with 
the code 
in framing its remuneration policy the committee has given  
full consideration to the matters set out in schedule a of 
the code as required by the regulations a resolution to 
approve this report will be proposed at the agm to be held 
on 28 july 2011 the regulations require the company’s 
auditor to report to the members on the ‘auditable part’ of 
this report marked  and to state in their opinion that 
this part of the report has been properly prepared in 
accordance with the act
remuneration committee 
the remuneration policy is set by the board and is described 
below the remuneration committee within the framework  
of this policy determines individual remuneration packages  
for the executive directors and the chairman the terms of 
reference of the committee are available on the group’s 
website wwwtalktalkgroupcom or on request from the 
company secretary 
remuneration for nonexecutive directors is determined  
by the board taking into account the commitments and 
responsibilities of the role 
the committee currently comprises the following independent 
nonexecutive directors john gildersleeve chairman 
brent hoberman and ian west jessica burley was also a 
member during the financial year up until her resignation 
in november 2010 roger taylor is also a member of the 
committee but for the reasons set out in the corporate 
governance section of this annual report he is not 
considered independent
except when matters concerning their own positions are being 
considered the chief executive officer and the group human 
resources director are normally invited to attend the meetings 
of the remuneration committee to assist the committee 
the committee may discuss any matter affecting the 
chairman without the chairman being present
the committee has access to independent advice where it 
considers it appropriate external advice was used in relation 
to share schemes 
remuneration policy
during the year ended 31 march 2011 the board undertook  
a review of group remuneration to ensure that the overall 
remuneration practices achieved the strategic aims of the 
group this took account of the following
• market conditions
•  the demerger from the carphone warehouse group  
plc and the listing of talktalk telecom group plc on  
the london stock exchange
•  the need to ensure that remuneration policy was in line 
with the risk profile of the group set by the board and was 
consistent with an overall policy to encourage longterm 
sustainable performance and the ‘value player’ positioning 
of the group in its marketplace
• the need to help reinforce the group’s strategy for growth
•  the requirement to provide a strong link between  
individual and business performance and ensuring 
alignment between employees and the delivery of  
value to shareholders
• the requirement to have clear and stretching targets
•  the need for the remuneration policy to be tailored to  
the group’s circumstances
•  the requirement for the group to recruit retain and 
motivate talent
• costeffectiveness and 
• reflect corporate governance best practice
the review concluded that rewards need to be designed 
to attract and retain individuals of high quality who have 
the requisite skills and who are incentivised to achieve 
high levels of performance this requires packages to be  
marketcompetitive and capable of rewarding exceptional 
performance the approach is to set fixed remuneration  
at market median levels and to offer variable rewards linked  
to the performance of the group which can provide significant 
overall levels of remuneration for exceptional performance  
and shareholder value creation
in order to closely align the interests of the executive directors 
and shareholders the company requires executive directors 
to build and retain a shareholding in the company of at least 
200 of their annual salary the company may in calculating 
this percentage take into account executive directors’ 
participation shares issued under the talktalk group value 
enhancement scheme a summary of which is set out later  
in this report  overview performance review governance financial statements other information
33
talktalk telecom group plc  annual report 2011
components of remuneration
the main fixed and performance related elements of 
remuneration that can be awarded to executive directors 
are as follows
• basic salary benefits and pension contribution fixed
• annual performance bonus variable and
• share options and performance shares variable
salaries and benefits
salaries and benefits were set in the context of the demerger 
from the carphone warehouse group plc and the listing of 
talktalk on the london stock exchange in march 2010 it is 
the policy of the board to review salaries annually 
annual performance bonus
cash bonuses are governed by performance conditions set  
by the remuneration committee maximum variable awards  
are paid only for exceptional performance the maximum 
bonus that can be paid is 200 per cent of basic salary the 
bonus scheme for the year ended 31 march 2011 was based 
on a ‘balanced scorecard’ that was a blend of financial 
measures for example group headline ebitda operating 
free cash flow revenue strategic projects for example the 
tiscali integration program customer migrations customer  
and employee satisfaction measures and innovation
the remuneration committee is satisfied that the bonus 
structure provides an excellent link between reward and 
improved performance of the group and in the creation  
of further shareholder value
sharebased incentive plans
aggregate emoluments shown do not include any amounts for 
the value of options to acquire ordinary shares in the company 
granted to or held by the directors details of the options for 
the directors who served during the year are as follows
talktalk group value enhancement scheme
the talktalk group value enhancement scheme ‘ttg ves’ 
is designed to enable participants to share in the incremental 
value of the group in the excess of an opening valuation as 
determined by the remuneration committee with the first 
opening valuation being at the start of the financial year ended 
31 march 2010 each award will entitle a participant either to 
purchase a fixed number of separate shares or be granted nil 
priced or par value options ‘options’ to acquire a separate 
class of shares in each case in the subsidiary company 
talktalk group limited the holding company for the talktalk 
business ‘participation shares’
when the performance conditions have been satisfied and the 
award vests the participation shares may be purchased by 
talktalk by the issue of talktalk shares or the options may 
be exercised and the resulting participation shares may be 
purchased by talktalk by the issue of talktalk shares 
any participation shares that are initially purchased by the 
participants will be acquired at market value and such 
participant will be offered a loan from talktalk at a 
commercial rate of interest in order to fund such a purchase 
discretionary share option plan
the discretionary share option plan ‘dsop’ is designed to 
provide a mediumterm incentive plan for certain employees 
of talktalk who will not participate in the ttg ves other grants 
may be made in special circumstances at the discretion 
of the committee it is the intention of the remuneration 
committee that generally in any one year participants may 
only receive an award under one of such schemes the 
exercise of the options is subject to continuing employment 
and performance conditions as set out in note five to the 
financial statements no employee will be granted options 
over 200 per cent of base salary unless the board determines 
that exceptional circumstances exist which justify exceeding 
this limit in which case options shall not exceed 300 per cent 
of base salary
saye schemes
the saye scheme in the uk is a saveasyouearn share 
option scheme and is approved by hmrc the saye schemes 
are administrated by the board or a duly authorised committee 
of the board all uk executive directors and employees of 
talktalk and participating companies within the group will be 
eligible to participate in the saye scheme as long as they have 
been employed for a qualifying period to participate in the 
saye scheme an eligible employee must enter into an saye 
contract and agree to make monthly contributions between 
£5 and £250 for a specified period three or five years 
a bonus is payable after expiration of the period
options granted to acquire talktalk shares under the saye 
scheme will have an option price determined by the board 
which will be not less than the higher of 80 per cent of the 
middle market quotation price or their nominal value
a similar scheme has been put in place for talktalk 
employees in ireland
further details of the features and operations of the ttg 
ves dsop and saye can be found in note five to the 
financial statements 34
talktalk telecom group plc  annual report 2011
directors’ remuneration report
continued
aggregate remuneration
the total amount of director’s
1
 remuneration and other 
benefits excluding pension contributions were as follows
director
basic
£000
taxable 
benefits
£000
bonuses
£000
2011
total
£000
2010
total
£000
executive
d harding
4
500 17 199 716 249
a stirling
3
375 9 149 533 152
d goldie
3
325 15 130 470 133
nonexecutive
c dunstone
35
360 2 – 362 4
r taylor
36
75 – – 75 15
j gildersleeve
3
73 – – 73 14
j allwood
3
60 – – 60 12
j burley
13
40 – – 40 12
b hoberman
3
50 – – 50 10
i west
2
8 – – 8 –
aggregate 
emoluments 1866 43 478 2387 601
notes 
1 resigned 16 november 2010
2 appointed 8 february 2011
3 appointed 20 january 2010
4  appointed 20 january 2010 and remunerated as a director from  
24 february 2010
5  basic salary for the prior year relates to the period from 29 march 2010  
to 31 march 2010 remuneration from 20 january 2010 to 28 march 2010 
was borne by cpw and recharged as part of the cpw costs set out in 
note 2 to the financial statements 
6  cpw had a mediumterm incentive plan for roger taylor which rewarded 
increases in the market capitalisation of this group between june 2009 
and december 2010 this incentive plan has been measured using the 
combined share price of the group and carphone warehouse group plc 
and the maximum payout of £10m was made during the period this amount 
was accrued as part of the demerger and is not included in the above
total remuneration for 2010 above relates only to that paid  
to directors for their role as directors of the company  
charles dunstone roger taylor and john gildersleeve  
were directors of cpw for which they respectively received 
total remuneration of £1733781 £1167426 and £395652 
for the period to 28 march 2010 these directors were then 
remunerated by the company from 29 march 2010
amy stirling and david goldie were employees but not directors 
of cpw amy and david were remunerated by the company for 
their roles as directors of the company from 20 january 2010
john allwood was not a director of cpw and was remunerated 
by the company from 28 january 2010 when he was appointed 
as a director of the company
pension contributions
the schedule below sets out payments by the group to 
defined contribution money purchase pension schemes  
on behalf of directors a fixed proportion of salary is paid by  
the company together with either a fixed proportion by the 
director or no contribution by the director and both amounts 
are invested on behalf of the director pension benefits are 
then funded by the total investment levels are reviewed 
annually against published market data none of the directors 
was a member of a defined benefit pension scheme during 
the year pension entitlements are based on basic salary only
director
2011
£000
2010
£000
d harding 51 –
a stirling 19 11
d goldie 65 4
total 135 15
external appointments
the board supports executive directors holding nonexecutive 
directorships of other companies and believes that such 
appointments are part of the continuing development of the 
executive directors from which the company will ultimately 
benefit the board has reviewed all such appointments and those 
appointments that the board believes require disclosure pursuant 
to the code are set out below the board has also agreed that 
the directors may retain their fees from such appointments 
currently dido harding is a nonexecutive director of the 
british land company plc for which the annual fee is £64600 
david goldie is also a board member of the northwest regional 
development agency for which he received a fee of £8666 
during the year
charles dunstone is also chairman of carphone warehouse 
group plc which the board believes is a significant other 
commitment for him
fees for nonexecutive directors
the fees for each of the nonexecutive directors are determined 
by the board after considering external market research the 
chairman’s fee is £360000 the deputy chairman’s fee is 
£60000 nonexecutive directors receive a basic fee of 
£45000 plus additional fees of £15000 for chairing the audit 
committee £10000 for chairing the remuneration committee 
and £5000 for chairing the nomination committee a fee of 
£5000 is paid for membership of the audit committee £5000 
for membership of the remuneration committee and £5000 
for membership of the nomination committee the senior 
independent director receives an additional fee of £7500 
the nonexecutive directors do not take part in discussions 
on their remuneration each of the nonexecutive directors has 
a letter of appointment substantially in the form suggested by 
the code and each has a three month notice period with no 
compensation for loss of office the company has no age limit 
for directors the dates of each contract are set out on page 38 overview performance review governance financial statements other information
35
talktalk telecom group plc  annual report 2011
directors’ interest in shares and dates of service contracts
details of directors’ interests in options to buy shares in the company are as follows
1 talktalk group schemes
a value enhancement scheme
as set out in note five to the financial statements prior to the demerger two value enhancement schemes were introduced 
to provide longterm incentives to senior management these were called the talktalk group value enhancement scheme 
‘ttg ves’ and the carphone warehouse talktalk group value enhancement scheme ‘cpw ttg ves’ 
the directors had the following percentage share in the ttg ves pool at 31 march 2011
director
2011
 share
2010
 share
d harding 10 10
a stirling 6 6
d goldie 6 6
the remaining percentage of allocated shares in the ttg ves pool is held by other senior management of the group based on 
the weighted average share price for the year and as disclosed in note five to the financial statements the dilutive effect of the 
potential number of shares in the ves pool at 31 march 2011 was 22 million 2010  28 million
the directors had the following interest bearing loans outstanding to the group in relation to the ttg ves at 31 march 2011 
director
2011
£000
2010
£000
d harding 480 461
a stirling 295 284
d goldie 295 284
1070 1029
interest on outstanding loans was charged at 4 during the year 2010  475
the directors had the following percentage share in the cpw ttg ves at 31 march 2011
director
2011
 share
2010
 share
r taylor 535 535
the remaining percentage share in the cpw ttg ves pool is held by other senior management of carphone warehouse group plc 
b discretionary share option plan
details of executive directors’ conditional right to receive nil priced options in the company are shown in the following table
 
director
at 31 march 2010  
or date of 
appointment
granted  
during the year
exercised during  
the year
lapsed  
during the year
at 31 march  
2011
exercise  
price per  
share £
exercisable  
from
expiry  
date
d harding – 236220 – – 236220 – 01092012 04122020
– 236220 – – 236220 – 01092013 04122020
total for d harding – 472440 – – 472440
for awards made in september 2010 the performance conditions are based on achieving a compound total shareholder 
return “tsr” of five per cent over the performance period full details of the scheme are disclosed in note five to the 
financial statements 36
talktalk telecom group plc  annual report 2011
directors’ remuneration report
continued
2 cpw legacy schemes
a share gift
the directors had the following interest bearing loans outstanding to the group in relation to the settlement of the tax liability 
arising as a result of a share gift given in december 2008 by cpw
director
2011
£000
2010
£000
a stirling 144 144
d goldie 144 144
288 288
b csop
director
at 31 march 2010  
or date of 
appointment
granted  
during the year
exercised during  
the year
lapsed  
during the year
at 31 march  
2011
exercise  
price per  
share £
exercisable  
from
expiry  
date
total for a stirling 106668 – – – 106668 052 06062006 06062013
r taylor 200000 – 200000
1
– – 087 19052002 19052010
200000 – 200000
1
– – 116 19052002 19052010
240000 – 240000
2
– – 073 21052004 21052011
444444 – – – 444444 052 06062006 06062013
250000 – – – 250000 048 11062005 11062012
total for r taylor 1334444 – 640000 – 694444
1 the market price at date of exercise was 127p
2 the market price at date of exercise was 137p
the market price per share was 134p as at 31 march 2011 2010  127p and the range during the year was 170p to 107p overview performance review governance financial statements other information
37
talktalk telecom group plc  annual report 2011
c performance shares
details of executive directors’ conditional right to receive nil priced options in the company are shown in the following table
director
at 31 march 2010  
or date of 
appointment
granted  
during the year
exercised during  
the year
lapsed  
during the year
at 31 march  
2011
exercise  
price per  
share £
exercisable  
from
expiry  
date
a stirling 52734 – – – 52734 – 28072007 28072014
1
52734 – – – 52734 – 28072008 28072014
1
145588 – – 145588 – – 04062010 04122016
2
145588 – – 145588 – – 04062011 04122016
2
total for a stirling 396644 – – 291176 105468
d goldie 200000 – – – 200000 – 28072008 28072015
379136 – – 379136 – – 04062010 04122016
2
379136 – – 379136 – – 04062011 04122016
2
total for d goldie 958272 – – 758272 200000
r taylor 482537 – – 482537 – – 04062010 04122016
2
482538 – – 482538 – – 04062011 04122016
2
213856 – – – 213856 – 11062005 11062012
675000 – – – 675000 – 28072007 28072014
675000 – – – 675000 – 28072008 28072015
total for r taylor 2528931 – – 965075 1563856
1 for awards made in july 2004 the performance conditions set out in previous cpw annual reports have been satisfied
2  for awards made in december 2006 the performance conditions set out in previous cpw annual reports were not satisfied and the shares lapsed 
in june 2010 performance
150
100
50
talktalk telecom group plc
ftse 250
26032010
31032011
£m
38
talktalk telecom group plc  annual report 2011
directors’ remuneration report
continued
directors’ interests in shares and dates of service contracts
ordinary shares of 01p
director 31 march 2011 31 march 2010 date of contract
c dunstone 295209396 296144535 20 january 2010
d harding – – 20 january 2010
a stirling 536687 536687 20 january 2010
d goldie 945460 945460 20 january 2010
r taylor 1083698 978678 20 january 2010
j gildersleeve 246000 246000 20 january 2010
j allwood – – 20 january 2010
b hoberman – – 20 january 2010
i west 164323 – 8 february 2011
performance graph
the graph below shows the group’s performance compared to the tsr performance of the ftse 250 from the date of the 
group’s listing 29 march 2010
the ftse 250 was selected as it is a broad market index of which the group is a member
this report was approved by the board on 18 may 2011 overview performance review governance financial statements other information
39
talktalk telecom group plc  annual report 2011
other statutory information
employment of disabled people
the company has an equal opportunities policy which  
ensures that disabled persons are provided with the same 
opportunities for employment career development training 
and promotion along with all other employees as part of this 
policy applications for employment by disabled persons are 
fully considered bearing in mind the abilities of the applicant 
concerned in the event of employees becoming disabled 
during employment a thorough process is followed and 
support provided including income support insurance  
to try to secure their employment 
supplier payment policy
it is the company’s policy to develop and maintain key 
business relationships with its suppliers to obtain mutually 
accepted payment terms the average credit period taken  
on trade payables was 24 days 2010  25 days
donations
the company made £240455 2010  £229915 of charitable 
donations and no political donations in either year
contracts with controlling shareholders
there are no material contracts with controlling shareholders 
except as disclosed in the directors’ remuneration report on 
pages 32 to 38
share capital
details in the movements in issued share capital during the 
year are provided in notes 21 and 22 in the financial statements
property plant and equipment
movements in property plant and equipment are set out  
in note 12 to the financial statements in the opinion of  
the directors the current open market value of the group’s 
interests in freehold land and buildings is not materially 
different from its book value at 31 march 2011 it is expected 
that any capital gains would be covered by capital losses
significant shareholdings
at 18 may 2011 the company had been notified of the 
following interests in the company’s shares
name
number of  
shares
percentage of  
share capital
david peter john ross 117160528 1282
capital research and 
management company 50596100 554
fmr llc 45592488 498
fil limited 45331791 495
government of singapore 
investment corporation pte ltd 36398095 398
the total interests of the directors are detailed in the 
directors’ remuneration report on pages 32 to 38
going concern
on the basis of current financial projections and facilities 
available the directors are satisfied that the group has 
adequate resources to continue in operation for the foreseeable 
future and consequently the financial statements continue to  
be prepared on the going concern basis as discussed in the 
finance review on page 16
directors’ indemnities
other than director’s liability insurance no other indemnity  
has been provided to directors
audit information
each of the persons who is a director at the date of approval  
of this annual report confirms that
•  so far as the director is aware there is no relevant audit 
information of which the company’s auditor are unaware and
•  the director has taken all the steps that heshe ought to 
have taken as a director in order to make himselfherself 
aware of any relevant audit information and to establish 
that the company’s auditor are aware of the information
this confirmation is given and should be interpreted in 
accordance with the provisions of s418 of the companies 
act 2006
by order of the board
talktalk telecom group plc 
11 evesham street 
london w11 4ar
tim morris 
company secretary 
18 may 2011 40 40 overview performance review governance financial statements other information
41 41
financial statements
statement of directors’ responsibilities 42
independent auditor’s report to the members  
of talktalk telecom group plc 43
consolidated income statement 44
consolidated statement of comprehensive income 45
consolidated statement of changes in equity 46
consolidated balance sheet 47
consolidated cash flow statement 48
notes to the consolidated financial statements 49
independent auditor’s report to the directors  
of talktalk telecom group plc 86
company balance sheet 87
company reconciliation of movement  
in shareholders’ funds 88
notes to the company financial statements 89 42
talktalk telecom group plc  annual report 2011
statement of directors’ responsibilities 
the directors are responsible for preparing the annual report 
and the financial statements in accordance with applicable law 
and regulations
company law requires the directors to prepare financial 
statements for each financial year under that law the directors 
are required to prepare the group financial statements in 
accordance with international financial reporting standards 
ifrss as adopted by the european union and article 4 of  
the ias regulation and have elected to prepare the parent 
company financial statements in accordance with united kingdom 
generally accepted accounting practice united kingdom 
accounting standards and applicable law under company 
law the directors must not approve the accounts unless they 
are satisfied that they give a true and fair view of the state 
of affairs of the company and of the profit or loss of the 
company for that period 
in preparing the parent company financial statements  
the directors are required to
•  select suitable accounting policies and then apply  
them consistently
•  make judgments and accounting estimates that are 
reasonable and prudent
•  state whether applicable uk accounting standards 
have been followed subject to any material departures 
disclosed and explained in the financial statements and
•  prepare the financial statements on the going concern 
basis unless it is inappropriate to presume that the 
company will continue in business
in preparing the group financial statements international 
accounting standard 1 requires that directors
• properly select and apply accounting policies
•  present information including accounting policies in a 
manner that provides relevant reliable comparable and 
understandable information 
•  provide additional disclosures when compliance with the 
specific requirements in ifrss are insufficient to enable 
users to understand the impact of particular transactions 
other events and conditions on the entity’s financial position 
and financial performance and
•  make an assessment of the company’s ability to continue 
as a going concern
the directors are responsible for keeping adequate 
accounting records that are sufficient to show and explain  
the company’s transactions and disclose with reasonable 
accuracy at any time the financial position of the company  
and enable them to ensure that the financial statements 
comply with the companies act 2006 they are also 
responsible for safeguarding the assets of the company  
and hence for taking reasonable steps for the prevention  
and detection of fraud and other irregularities
the directors are responsible for the maintenance and 
integrity of the corporate and financial information included  
on the company’s website legislation in the united kingdom 
governing the preparation and dissemination of financial 
statements may differ from legislation in other jurisdictions
responsibility statement 
we confirm that to the best of our knowledge
•  the financial statements prepared in accordance with the 
relevant financial reporting framework give a true and fair 
view of the assets liabilities financial position and profit  
or loss of the company and the undertakings included 
in the consolidation taken as a whole and
•  the management report which is incorporated into the 
directors’ report includes a fair review of the development 
and performance of the business and the position of the 
company and the undertakings included in the consolidation 
taken as a whole together with a description of the principal 
risks and uncertainties that they face
by order of the board
d harding   a stirling  
chief executive officer  chief financial officer 
18 may 2011   18 may 2011 overview performance review governance financial statements other information
43
talktalk telecom group plc  annual report 2011
independent auditor’s report to the members  
of talktalk telecom group plc
opinion on other matter prescribed by the companies act 2006
in our opinion the information given in the directors’ report 
for the financial year for which the group financial 
statements are prepared is consistent with the group 
financial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following
under the companies act 2006 we are required to report  
to you if in our opinion
•  certain disclosures of directors’ remuneration specified  
by law are not made or
•  we have not received all the information and explanations we 
require for our audit
under the listing rules we are required to review
•  the directors’ statement contained within the financial 
statements in relation to going concern 
•  the part of the corporate governance statement relating 
to the company’s compliance with the nine provisions of 
the june 2008 combined code specified for our review and
•  certain elements of the report to shareholders by the 
board on directors’ remuneration
other matter
we have reported separately on the company financial 
statements of talktalk telecom group plc for the period  
ended 31 march 2011 and on the information in the 
directors’ remuneration report that is described as 
having been audited 
john murphy senior statutory auditor
for and on behalf of deloitte llp 
chartered accountants and statutory auditor 
london united kingdom 
18 may 2011
we have audited the group financial statements of talktalk 
telecom group plc for the year ended 31 march 2011 which 
comprise the consolidated income statement the consolidated 
statement of comprehensive income the consolidated statement 
of changes in equity the consolidated balance sheet the 
consolidated cash flow statement and the related notes 1 to 29 
the financial reporting framework that has been applied in their 
preparation is applicable law and international financial reporting 
standards ifrss as adopted by the european union
this report is made solely to the company’s members  
as a body in accordance with chapter 3 of part 16 of the 
companies act 2006 our audit work has been undertaken so 
that we might state to the company’s members those matters 
we are required to state to them in an auditor’s report and for 
no other purpose to the fullest extent permitted by law we 
do not accept or assume responsibility to anyone other than 
the company and the company’s members as a body for our 
audit work for this report or for the opinions we have formed
respective responsibilities of directors and auditor
as explained more fully in the directors’ responsibilities 
statement the directors are responsible for the preparation  
of the group financial statements and for being satisfied that 
they give a true and fair view our responsibility is to audit  
and express an opinion on the group financial statements  
in accordance with applicable law and international standards  
on auditing uk and ireland those standards require us to 
comply with the auditing practices board’s ethical standards 
for auditors
scope of the audit of the financial statements
an audit involves obtaining evidence about the amounts  
and disclosures in the financial statements sufficient to give 
reasonable assurance that the financial statements are free 
from material misstatement whether caused by fraud or error 
this includes an assessment of whether the accounting 
policies are appropriate to the group’s circumstances and 
have been consistently applied and adequately disclosed the 
reasonableness of significant accounting estimates made by 
the directors and the overall presentation of the financial 
statements in addition we read all the financial and non
financial information in the annual report to identify material 
inconsistencies with the audited financial statements if we 
become aware of any apparent material misstatements or 
inconsistencies we consider the implications for our report
opinion on financial statements
in our opinion the group financial statements
•  give a true and fair view of the state of the group’s affairs as 
at 31 march 2011 and of its profit for the year then ended
•  have been properly prepared in accordance with ifrss 
as adopted by the european union and
•  have been prepared in accordance with the requirements 
of the companies act 2006 and article 4 of the ias regulation 44
talktalk telecom group plc  annual report 2011
consolidated income statement
 
for the year ended 31 march 2011
before 
amortisation of 
acquisition 
intangibles and 
exceptional 
items
amortisation of 
acquisition 
intangibles and 
exceptional 
items
after 
amortisation of 
acquisition 
intangibles and 
exceptional 
items
before 
amortisation of 
acquisition 
intangibles and 
exceptional 
items
amortisation of 
acquisition 
intangibles and 
exceptional 
items
after 
amortisation 
of acquisition 
intangibles and 
exceptional 
items
notes
2011
£m
2011
£m
2011
£m
2010
£m
2010
£m
2010
£m
revenue 2 1765 – 1765 1686 – 1686
cost of sales 877 – 877 838 – 838
gross profit 888 – 888 848 – 848
operating expenses excluding amortisation 
and depreciation 3 612 48 660 627 47 674
ebitda 276 48 228 221 47 174
depreciation 3 12 57 3 60 46 1 47
amortisation 3 11 26 66 92 24 87 111
share of results of joint venture 14 1 – 1 – – –
operating profit 192 117 75 151 135 16
finance costs 6 18 – 18 10 1 11
investment revenue 6 – – – 6 – 6
profit before taxation 174 117 57 147 136 11
taxation 7 52 30 22 41 27 14
profit loss for the year 122 87 35 106 109 3
attributable to the equity holders of the parent company 122 87 35 106 109 3
earnings per share 
basic pence 10 135 39 118 03
diluted pence 10 128 37 112 03
 a reconciliation of headline information to statutory information is provided in note 9 to the financial statements
the accompanying notes are an integral part of this consolidated income statement all amounts relate to continuing operations  overview performance review governance financial statements other information
45
talktalk telecom group plc  annual report 2011
consolidated statement of comprehensive income
 
for the year ended 31 march 2011
notes
2011
£m
2010
£m
profit loss for the year
1
35 3
exchange differences on translation of foreign operations
1
 1 –
cash flow hedges and currency translation
2
1 1
taxation of items relating to components of other comprehensive income
1
7 2 1
total comprehensive income expense for the year 37 5
attributable to the equity holders of the parent company 37 5
1 recognised within retained earnings and other reserves
2 recognised within the translation reserve 
the accompanying notes are an integral part of this consolidated statement of comprehensive income 46
talktalk telecom group plc  annual report 2011
consolidated statement of changes in equity
 
for the year ended 31 march 2011
share 
capital
share  
premium
translation 
reserve
demerger 
reserve
retained 
earnings and 
other reserves total
notes £m £m £m £m £m £m
at 1 april 2010 1 586 60 513 378 392
total comprehensive income for the year – – 1 – 38 37
recycling of translation reserve – – 4 – – 4
settlement of group esot shares – – – – 1 1
net cost of sharebased payments 5 – – – – 4 4
equity dividends 8 – – – – 15 15
at 31 march 2011 1 586 65 513 406 415
share 
capital
share  
premium
translation 
reserve
demerger 
reserve
retained 
earnings and 
other reserves total
notes £m £m £m £m £m £m
at 1 april 2009 – – 59 529 232 702
total comprehensive income for the year – – 1 – 4 5
issue of share capital 21 22 1 986 – 987 – –
capital reduction 22 – 400 – – 400 –
net cost of sharebased payments 5 – – – – 4 4
sharebased payments reserve debit 5 – – – – 3 3
equity dividends 8 – – – – 251 251
movements in demerger reserve 22 – – – 55 – 55
at 31 march 2010 1 586 60 513 378 392
the accompanying notes are an integral part of this consolidated statement of changes in equity
in march 2010 the share premium relating to the ordinary shares was reduced by £400m by way of a courtapproved capital 
reduction note 22 this had the effect of creating distributable reserves which may be released at the discretion and upon 
the resolution of the board 
during the year ended 31 march 2010 equity dividends of £251m were paid by talktalk telecom holdings limited including 
£69m of dividends paid to its shareholders and an intercompany dividend of £182m paid as part of the demerger note 8 overview performance review governance financial statements other information
47
talktalk telecom group plc  annual report 2011
consolidated balance sheet
 
for the year ended 31 march 2011
notes
2011
£m
2010  
as restated
£m
noncurrent assets
goodwill 11 471 470
other intangible assets 11 255 316
property plant and equipment 12 290 262
noncurrent asset investments 13 1 1
investment in joint venture 14 4 –
deferred tax asset 7 116 155
1137 1204
current assets
cash and cash equivalents 18 1 1
inventories 15 3 2
trade and other receivables 16 155 180
loans to related parties 16 2 3
161 186
total assets 1298 1390
current liabilities
trade and other payables 17 376 400
corporation tax liabilities 22 42
loans and other borrowings 18 44 19
provisions 20 32 29
474 490
noncurrent liabilities 
loans and other borrowings 18 395 490
provisions 20 14 18
409 508
total liabilities 883 998
net assets 415 392
equity
share capital 21 22 1 1
share premium 22 586 586
translation reserve 22 65 60
demerger reserve 22 513 513
retained earnings and other reserves 22 406 378
funds attributable to equity shareholders 415 392
 the prior year balance sheet has been restated to reflect the finalisation of the tiscali uk and uk telco acquisition purchase prices note 29
the accompanying notes are an integral part of this consolidated balance sheet
these financial statements were approved by the board on 18 may 2011 they were signed on its behalf by
d harding      a stirling  
chief executive officer     chief financial officer 
18 may 2011      18 may 2011 48
talktalk telecom group plc  annual report 2011
consolidated cash flow statement
 
for the year ended 31 march 2011
notes
2011
£m
2010
£m
operating activities
operating profit 75 16
adjustments for noncash items
sharebased payments 5 4 4
depreciation 3 12 60 47
amortisation 3 11 92 111
share of losses of joint venture 14 1 –
recycling of translation reserve 9 4 –
fair value gain on step acquisition 13 1 –
operating cash flows before movements in working capital 227 178
decrease in trade and other receivables 11 35
increase in inventory 1 1
decrease increase in trade and other payables 28 2
decrease in provisions 4 13
cash generated by operations 205 201
income taxes paid 2 2
net cash flows generated from operating activities 203 199
investing activities
interest received 6 – 6
acquisition of subsidiaries and joint venture net of cash acquired 13 14 5 240
disposal of subsidiaries net of cash disposed 13 4 –
acquisition of intangible assets 27 35
acquisition of property plant and equipment 83 67
disposal of property plant and equipment – 1
cash flows used in investing activities 101 335
financing activities
settlement of group esot shares 22 1 –
repayment of borrowings 23 72 425
drawdown of borrowings 23 – 500 
interest paid 17 9
cash flows relating to movements in demerger reserves – 54
net decrease in loans to related parties 23 1 394
dividends paid 8 15 251
cash flows used from financing activities 102 155
net increase in cash and cash equivalents – 19
cash and cash equivalents at the start of the year 8 27
cash and cash equivalents at the end of the year 8 8
cash and cash equivalents for the purpose of this statement comprise
cash and cash equivalents 18 1 1
bank overdrafts 18 9 9
8 8
 bank overdrafts are disclosed within loans and other borrowings less than one year
the accompanying notes are an integral part of this consolidated cash flow statement overview performance review governance financial statements other information
49
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
the prior year consolidated financial statements of the group 
have been prepared with the objective of presenting the 
results net assets and cash flows of the group in the form  
that arose on completion of the demerger as if it had been  
a standalone business during the year ended 31 march 2010
the financial statements have been prepared by aggregating 
the statutory accounts of the companies and assets that  
have been transferred to the group on demerger any assets 
and liabilities held within the consolidation of cpw that related 
to the group were also reflected in the consolidated financial 
statements as though they formed part of the group the 
principles of ias 27 ‘consolidated and separate financial 
statements’ and sic 12 ‘consolidation – special purpose 
entities’ have been applied in determining the companies 
and assets to be combined 
as a part of the demerger certain companies and assets  
were transferred out of the group these companies and 
assets have been treated as though they were never part  
of the group such transfers were made at market value  
as determined by management for cash consideration  
during march 2010 at 31 march 2010 the full value at which 
transfers were made are reflected in the balance sheet and 
any profits or losses arising on the transfers are reflected 
in the demerger reserve as these are effectively treated 
as a capital contribution from cpw
adjustments reflected in the demerger reserve which  
have implications for cash and cash equivalents have  
been disclosed in the cash flow statement as cash  
flows relating to movements in demerger reserve
dividends to or from other entities in cpw have been 
eliminated with the corresponding entry recorded in equity 
such dividends would not have been applicable had the 
operations been independent during the current and 
preceding year and are not representative of the future 
position of the group such payments are recorded in 
cash flows relating to movements in demerger reserve
cpw issued equity settled sharebased payments to 
certain employees of its subsidiaries and of best buy europe 
the related expense arising in relation to these employees 
has been allocated to the group based on the businesses 
that benefited from the incentives
taxation has been allocated in the income statement of the 
group to reflect as far as possible the underlying tax position 
of the business any group relief provided between companies 
in cpw is therefore treated as having been charged even if 
such charges were not made 
as the company did not exist during the year ended 
31 march 2010 in the form that arose on demerger the 
average actual shares in issue during this year do not provide 
a meaningful basis for calculating eps eps was therefore 
calculated based on the number of cpw shares in issue 
until the demerger date the number of the group’s shares 
in issue after that date and the shareholding of the group 
esot during this financial year
1 accounting policies and basis of preparation
basis of preparation
talktalk telecom group plc is incorporated in the 
united kingdom 
the consolidated financial statements of the company have 
been prepared in accordance with international financial 
reporting standards ‘ifrs’ as adopted for use in the 
european union and as applied in accordance with the 
provisions of the companies act 2006 these financial 
statements therefore comply with article 4 of the european 
union international accounting standard regulation  
the company has applied united kingdom generally 
accepted accounting practice ‘gaap’ in the preparation 
of its individual financial statements which are contained 
on pages 86 to 93
the financial statements have been prepared on the going 
concern basis details of the considerations undertaken 
by the directors in reaching this conclusion are set out 
on page 19 within the finance review
the financial statements have been prepared on the historical 
cost basis except for the revaluation of certain financial 
instruments and investments the financial statements are 
presented in sterling rounded to the nearest million because 
that is the currency of the principal economic environment 
in which the group operates
the group’s principal accounting policies are set out below
basis of consolidation
the consolidated financial statements incorporate the  
financial statements of the company entities controlled by  
the company its subsidiaries and entities jointlycontrolled  
by the company its joint ventures made up to 31 march each 
year control is achieved where the company has the power  
to govern the financial and operating policies of an investee 
entity so as to obtain benefits from its activities 
the results of subsidiaries acquired or sold during the year are 
included from or to the date on which control passed to or was 
relinquished by the group intercompany transactions and 
balances between subsidiaries are eliminated on consolidation
where necessary adjustments are made to the financial 
statements of subsidiaries to bring accounting policies  
used into line with those used by the group
shares in the company held by the group esot are shown 
as a reduction in shareholders’ funds other assets and 
liabilities held by the trust are consolidated with the assets 
and liabilities of the group
comparative information – presentation of the group’s 
results for the year ended 31 march 2010
on 26 march 2010 cpw demerged into carphone warehouse 
group plc and the group the company and the carphone 
warehouse group plc were separately listed on the london 
stock exchange  50
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
the adoption of ifrs 1 ifrs 2 ias 28 ifric 17 and 
improvement to ifrs april 2009 have had no material  
impact on the group
ifrs 3 2008 ‘business combinations’ ias 27 2008 
‘consolidated and separate financial statements’ and  
ias 28 2008 ‘investments in associates’
the most significant changes to the group’s previous accounting 
policies relate to business combinations these are acquisition 
related costs are included in operating expenses as they are 
incurred rather than capitalised any changes to the cost of an 
acquisition including contingent consideration resulting from  
an event after the date of acquisition are recognised in profit or 
loss rather than as an adjustment to goodwill and where a step 
acquisition occurs the group will remeasure its previously held 
equity interest at acquisition date fair value and recognise the 
resulting gain or loss if any in the income statement or other 
comprehensive income 
the adoption of ifrs 3 2008 and the subsequent changes to 
the accounting policies have resulted in the group recognising 
a gain of £1m within its income statement in respect of the fair 
value of the equity interest previously held for the year ended 
31 march 2011
any adjustments to contingent consideration of acquisitions 
made prior to 1 april 2010 which result in an adjustment to 
goodwill continue to be accounted for under ifrs 3 2004  
and ias 27 2005
ias 24 2009 ‘related party disclosures’
the group has early adopted ias 24 2009 ‘related party 
disclosures’ which was endorsed by the eu in july 2010 and 
as such can be adopted for the year ended 31 march 2011 
the impact of the standard is that it simplifies the definition  
of a related party with shared person or entity director 
shareholder or otherwise no longer automatically implying  
the existence of a related party relationship under the 
revised standard this only occurs where the person or entity 
can exert significant influence over both entities the impact 
is that following the demerger of the group and the adoption 
of ias 24 2009 best buy europe and carphone warehouse 
group plc are no longer considered related parties of the group
foreign currency translation and transactions
material transactions in foreign currencies are hedged using 
forward purchases or sales of the relevant currencies and  
are recognised in the financial statements at the exchange 
rates thus obtained unhedged transactions are recorded  
at the exchange rate on the date of the transaction hedge 
accounting as defined by ias 39 ‘financial instruments 
recognition and measurement’ has been applied in the 
current and preceding financial year by marking to market  
the relevant financial instruments at the balance sheet date 
and recognising the gain or loss in equity in respect of cash 
flow hedges and through the income statement in respect  
of fair value hedges
1 accounting policies and basis of preparation continued 
diluted eps has been calculated based on options held over 
cpw shares during the year ended 31 march 2010 and the 
group’s proportion of the cpw share price
changes in accounting policy
in the current year the following new and revised standards 
and interpretations have been adopted unless otherwise 
stated the adoption of these standards and interpretations  
has had no significant impact on these financial statements
•  ifrs 1 revised ‘firsttime adoption of international 
financial reporting standards’
•  ifrs 2 amended ‘group cashsettled sharebased 
payment transactions’ the amendment clarifies the 
accounting for sharebased payment transactions  
between group entities
•  ifrs 3 2008 ‘business combinations’ the impact  
of the changes are set out below
•  ias 24 2009 ‘related party disclosures’ the impact  
of the changes are set out below
•  ias 27 2008 ‘consolidated and separate financial 
statements’ the impact of the changes are set out below
•  ias 28 revised ‘investments in associates’ the impact  
of the changes are set out below
•  ifric 17 ‘distribution of noncash assets to owners’ the 
interpretation provides guidance on when an entity should 
recognise a noncash dividend payable how to measure 
the dividend payable and how to account for any difference 
between the carrying amount of the assets distributed and 
the carrying amount of the dividend payable when the 
payable is settled and
•  improvements to ifrs april 2009 the impact of the 
changes are set out below
the following amendments were made as part of 
improvements to ifrs 2009
•  amendment to ifrs 2 ‘sharebased payment’ ifrs 2 has 
been amended following the issue of ifrs 3 2008 to 
confirm that the contribution of a business on formation  
of a joint venture and common control transactions are  
not within the scope of ifrs 2
•  amendment to ias 17 ‘leases’ ias 17 has been amended 
such that it may be possible to classify a lease of land as  
a finance lease if it meets the criteria for that classification 
under ias 17 
•  amendment to ias 39 ‘financial instruments recognition 
and measurement’ ias 39 has been amended to state  
that options contracts between an acquirer and a selling 
shareholder to buy or sell an acquiree that will result in a 
business combination at a future acquisition date are not 
excluded from the scope of the standard overview performance review governance financial statements other information
51
talktalk telecom group plc  annual report 2011
the movement in cumulative expense since the previous 
balance sheet date is recognised in the income statement 
with a corresponding entry in reserves
for schemes with market performance criteria the number 
of options expected to vest is adjusted only for expectations of 
leavers prior to vesting the movement in cumulative expense 
since the previous balance sheet date is recognised in the 
income statement with a corresponding entry in reserves
if a sharebased payment scheme is cancelled any remaining 
part of the fair value of the scheme is expensed through the 
income statement if a sharebased payment scheme is forfeited 
no further expense is recognised and any charges previously 
recognised through the income statement are reversed
sharebased payment charges are also recognised on loans 
that are provided to employees to settle personal tax liabilities 
to the extent to which the loans are not in certain circumstances 
repayable the cost of such loans is expensed on grant
charges also arise on loans that are provided to employees to 
fund the purchase of shares in the group as part of longterm 
incentives plans ltip to the extent to which the loans are not 
in certain circumstances repayable the cost of such loans is 
expensed over the course of the relevant incentive plans
where loans are granted for the purchase of shares under  
a ltip interest is charged on these loans 
in accordance with ifrs 2 ‘sharebased payment’ no cost  
has been recognised in respect of the options granted  
before 7 november 2002 
subscriber acquisition costs
subscriber acquisition costs being third party costs of recruiting 
and retaining new customers are expensed as incurred 
pensions
contributions to defined contribution schemes are charged to 
the income statement as they become payable in accordance 
with the rules of the schemes
dividends
dividend income is recognised when payment has been 
received final dividend distributions are recognised as a 
liability in the financial statements in the year in which they  
are approved by the relevant shareholders interim dividends 
are recognised in the year in which they are paid
special dividends relating to the demerger transaction have 
been recognised as a liability in the financial statements in the 
year in which they were approved by the relevant shareholders
leases
rental payments under operating leases are charged to  
the income statement on a straightline basis over the  
period of the lease lease incentives and rentfree periods  
are amortised through the income statement over the 
period of the lease
the results of overseas operations are translated at the average 
foreign exchange rates for the year and their balance sheets 
are translated at the rates prevailing at the balance sheet date 
goodwill is held in the currency of the operations to which it 
relates exchange differences arising on the translation of opening 
net assets goodwill and results of overseas operations are 
recognised in equity all other exchange differences are included 
in the income statement
the principal exchange rates against uk sterling used in these 
financial statements are as follows 
average closing
2011 2010 2011 2010
euro 117 113 113 112
united states dollar 156 159 160 152
where a foreign operation is sold the gain or loss on disposal 
recognised in the income statement is determined after taking 
into account the cumulative currency translation differences 
that are attributable to the operation
revenue
revenue is stated net of vat and other sales related taxes and 
comprises revenue generated from the provision of fixed line 
telecommunications services all such revenue is recognised 
as the services are provided
• line rental is recognised in the period to which it relates
•  voice and broadband subscriptions are recognised in the 
period to which they relate
•  voice usage is recognised in the period in which the 
customer takes the service
•  promotional discounts are amortised on a straightline 
basis over the minimum contract period subject to an 
adjustment for in contract churn
•  connection charges are recognised in the period in which 
the connection is made and
•  data service solutions and other service contracts are 
recognised as the group fulfils its performance obligations 
sharebased payments
the group issues equity settled sharebased payments to 
certain employees equity settled sharebased payments  
are measured at fair value at the date of grant and expensed 
over the vesting period based on an estimate of the number 
of shares that will eventually vest
fair value is measured by use of a binomial model for  
sharebased payments with internal performance criteria  
for example eps targets and a black scholes or monte  
carlo model for those with external performance criteria  
for example tsr targets
for schemes with nonmarket performance criteria the number 
of options expected to vest is recalculated at each balance sheet 
date based on expectations of performance against target and 
of leavers prior to vesting 52
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
acquisition intangibles
acquired intangible assets such as customer bases customer 
revenue share agreements brands and other intangible assets 
acquired through a business combination are capitalised 
separately from goodwill and amortised over their expected 
useful lives of up to six years on a straightline basis the value 
attributed to such assets is based on the future economic 
benefit that is expected to be derived from them calculated  
as the present value of future cash flows after a deduction 
for contributory assets
at the acquisition date acquisition intangibles are allocated  
to each of the cgu expected to benefit from the synergies of 
the combination details of impairment testing are provided 
within the impairment of assets section below 
property plant and equipment
property plant and equipment are stated at cost net of 
depreciation and any provision for impairment depreciation  
is provided on all property plant and equipment at rates 
calculated to write off the cost less estimated residual value 
of each asset on a straightline basis over its expected useful 
life from the date it is brought into use as follows
short leasehold costs 
10 or the lease term if less than ten years
network equipment and computer hardware 
125 – 50 per annum
fixtures and fittings 
20 – 25 per annum
impairment of assets 
goodwill 
goodwill is not subject to amortisation but is tested for impairment 
annually or whenever there is an indication that the asset may 
be impaired
for the purpose of impairment testing at the acquisition date 
goodwill is allocated to each of the cgus expected to benefit 
from the synergies of the combination the group tests goodwill 
annually for impairment or more frequently if there are indications 
that goodwill might be impaired this review is performed at a 
cgu level
the group has two cgus – residential and corporate  
the group’s shared costs and assets relating mainly to 
infrastructure and central overheads are allocated across the 
two cgus based on the relative future cash flows impairment 
is determined by assessing the future cash flows of the cgu 
to which the goodwill relates the future cash flows of the 
group are taken from the board or management approved 
three year plan and extrapolated out for the following 17 years 
based on the uk’s longterm growth rate this is discounted  
by the cgu’s weighted average cost of capital to give the net 
present value of that cgu where the net present value of 
future cash flows is less than the carrying value of the unit  
the impairment loss is allocated first to reduce the carrying 
amount of any goodwill allocated to the cgu and then to the 
other assets of the segment prorata on the basis of the 
carrying amount of each asset in the unit any impairment  
1 accounting policies and basis of preparation continued 
gains or losses from sale and leaseback transactions are 
deferred over the life of the new lease to the extent that the 
rentals are considered to be above or below market rentals 
the remaining gain or loss is recognised within operating 
expenses in the year in which the sale is completed
taxation
current tax including uk corporation tax and overseas tax is 
provided at amounts expected to be paid or recovered using 
the tax rates and laws that have been enacted or substantively 
enacted at the balance sheet date
deferred tax is provided on temporary differences between 
the carrying amount of an asset or liability in the balance  
sheet and its tax base
deferred tax liabilities represent tax payable in future periods 
in respect of taxable temporary differences deferred tax 
assets represent tax recoverable in future periods in respect  
of deductible temporary differences and the carryforward  
of unused tax losses and credits deferred tax is determined 
using the tax rates that have been enacted or substantively 
enacted at the balance sheet date and are expected to apply 
when the deferred tax asset is realised or the deferred tax 
liability is settled
a deferred tax asset is recognised only to the extent that it  
is probable that future taxable profits will be available against 
which the asset can be utilised current and deferred tax is 
recognised in the income statement except where it relates  
to an item recognised directly in reserves in which case it 
is recognised directly in reserves
deferred tax assets and liabilities are offset where there is 
a legal right to do so in the relevant jurisdictions
intangible assets
goodwill
goodwill arising on the acquisition of subsidiary undertakings 
and businesses representing the excess of the fair value of 
the consideration given over the fair value of the identifiable 
assets and liabilities acquired is recognised initially as an 
asset at cost and is subsequently measured at cost less 
any accumulated impairment losses
on disposal of a subsidiary undertaking the relevant goodwill 
is included in the calculation of the profit or loss on disposal
operating intangibles
operating intangibles include internal infrastructure and design 
costs incurred in the development of software for internal use 
internally generated software is recognised as an intangible 
asset only if it can be separately identified it is probable that 
the asset will generate future economic benefits and the 
development cost can be measured reliably where these 
conditions are not met development expenditure is recognised 
as an expense in the year in which it is incurred operating 
intangibles are amortised on a straightline basis over their 
estimated useful economic lives of up to eight years overview performance review governance financial statements other information
53
talktalk telecom group plc  annual report 2011
provisions
provisions are recognised when a legal or constructive 
obligation exists as a result of past events and it is probable 
that an outflow of resources will be required to settle 
the obligation and a reliable estimate can be made of the 
amount of the obligation provisions are discounted where 
the time value of money is considered to be material
provisions are categorised as follows
operating efficiencies
operating efficiencies provisions relate principally to 
redundancy costs and are only recognised where plans  
are demonstrably committed and where appropriate 
communication to those affected has been undertaken  
at the balance sheet date these provisions are typically 
expected to be utilised over the 12 months following 
announcement of the reorganisation 
one company integration
these provisions relate principally to redundancy costs and 
are only recognised where plans are demonstrably committed 
and where appropriate communication to those affected 
has been undertaken at the balance sheet date and onerous 
contract costs where a decision has been made to exit 
a contract as part of the one company reorganisation 
these provisions are typically expected to be utilised 
over 12 to 24 months 
property
property provisions relate to dilapidations and similar property 
costs and costs associated with onerous property contracts 
all such provisions are assessed by reference to the terms 
and conditions of the contract and market conditions at the 
balance sheet date property provisions are expected to  
be utilised over the next nine years
contract and other
contract and other provisions relate to onerous contracts  
and contracts with unfavourable terms arising on the 
acquisition of businesses and anticipated costs of unresolved 
legal disputes all such provisions are assessed by reference 
to the best available information at the balance sheet date 
contract and other provisions are expected to be utilised  
over the next 24 months
loss is recognised in the income statement and is not 
subsequently reversed
sensitivity analysis is performed using reasonably possible 
changes in the key assumptions 
property plant and equipment and other intangible assets
at each reporting date the group reviews the carrying amounts 
of its tangible and intangible assets to determine whether there 
is any indication that those assets have suffered an impairment 
loss where an indicator of impairment exists the group makes 
a formal estimate of the asset’s recoverable amount and the extent 
of any impairment loss an intangible asset with an indefinite 
useful life is tested for impairment at least annually and whenever 
there is an indication that the asset may be impaired
the recoverable amount is the higher of an asset’s fair value 
less costs to sell and its value in use in assessing value in use 
the estimated cash flows are discounted to their present value 
using a pretax discount rate that reflects the current market 
assessments of the time value of money and the risks specific 
to the asset for which the estimates of future cash flows have 
not been adjusted
if the recoverable amount of an asset is estimated to be less 
than the carrying amount the carrying amount of the asset 
or cgu is reduced to its recoverable amount 
investments
investments other than subsidiaries are initially recognised  
at cost being the fair value of the consideration given plus  
any transaction costs associated with the acquisition
investments are categorised as availableforsale and are then 
recorded at fair value changes in fair value together with any 
related taxation are taken directly to equity and recycled to the 
income statement when the investment is sold or determined to 
be impaired
interests in joint ventures 
interests in joint ventures are accounted for using the equity 
method the consolidated income statement includes the group’s 
share of the posttax profits or losses of the joint ventures based 
on their financial statements for the year in the consolidated 
balance sheet the group’s interest in joint ventures are shown 
as a noncurrent asset in the balance sheet representing the 
group’s investment in the share capital of the joint ventures as 
adjusted by postacquisition changes in the group’s share of 
the net assets or liabilities less provision for any impairment 
when a joint venture has net liabilities any loans advanced  
to the venture are included in the group’s equity accounted 
investment in it when a venture has net assets any loans 
advanced to it are shown separately in the balance sheet  
as a receivable to the group 
inventories
inventories are stated at the lower of cost and net realisable 
value and principally represents modems and routers net 
realisable value is based on estimated selling price less costs 
expected to be incurred on disposal a provision is made for 
obsolete items where appropriate 54
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
• equity instruments
equity instruments issued by the group are recorded at the 
proceeds received net of direct issuance costs
shares in the company held by the group esot are shown as 
a reduction in shareholders’ funds other assets and liabilities 
held by the trust are consolidated with the assets of the group
derivative financial instruments and hedge accounting
the group’s activities expose it to the financial risks of 
changes in foreign exchange rates and interest rates the use 
of financial derivatives is governed by the framework approved 
by the board which provide written principles on the use of 
financial derivatives consistent with the group’s risk management 
strategy changes in values of all derivatives of a financing 
nature are included within investment income and financing 
costs in the income statement the group does not use 
derivative financial instruments for speculative purposes
derivative financial instruments are initially measured at fair 
value on the contract date and are subsequently remeasured 
to fair value at each reporting date 
hedge accounting is discontinued when the hedging 
instrument expires or is sold terminated or exercised or  
no longer qualifies for hedge accounting or the company 
chooses to end the hedging relationship 
fair value hedges
the group uses derivative instruments primarily interest  
rate swaps to manage its interest rate risk the group 
designates these as fair value hedges with changes in fair 
value of the hedging instrument recognised in the income 
statement for the year together with the changes in the fair 
value of the hedged item to the extent the hedge is effective
headline results and exceptional items
headline results are stated before the amortisation of 
acquisition intangibles and exceptional items exceptional 
items are those that are considered to be oneoff non
recurring in nature and so material that the directors believe 
that they require separate disclosure to avoid distortion  
of underlying performance and should be separately 
presented on the face of the income statement further  
details of the exceptional items are provided in note 9
critical judgements in applying the group’s  
accounting policies
in the process of applying the group’s accounting policies 
management has made the following judgements that have  
the most significant effect on the amounts recognised in  
the financial statements estimates and assumptions used  
in the preparation of the financial statements are continually 
reviewed and revised as necessary whilst every effort is made 
to ensure that such estimates and assumptions are reasonable 
by their nature they are uncertain and as such changes in 
estimates and assumptions may have a material impact
1 accounting policies and basis of preparation continued 
 
financial instruments
financial assets and financial liabilities in respect of financial 
instruments are recognised in the group’s balance sheet 
when the group becomes a party to the contractual provisions 
of the instrument 
trade and other receivables
trade receivables loans and other receivables that have fixed 
or determinable payments that are not quoted in an active 
market are classified as loans and receivables loans and 
receivables are measured at amortised cost using the effective 
interest method less any impairment interest income is 
recognised by applying the effective interest rate except  
for shortterm receivables when the recognition of interest 
would be immaterial 
cash and cash equivalents
cash and cash equivalents includes cashinhand and 
deposits held at call with banks 
trade payables
trade payables are other financial liabilities initially measured 
at fair value and subsequently measured at amortised cost
financial liabilities and equity instruments
financial liabilities and equity instruments issued by the group 
are classified according to the substance of the contractual 
arrangements entered into and the definitions of a financial 
liability and an equity instrument an equity instrument is any 
contract that evidences a residual interest in the assets of  
the group after deducting all of its liabilities and includes  
no obligation to deliver cash or other financial assets 
the accounting policies adopted for specific financial 
liabilities and equity instruments are set out below
• loans and other borrowings
loans and other borrowings represent committed and 
uncommitted bank loans bank overdrafts and loans from 
related parties these are initially measured at fair value which 
is equal to cost at inception and are subsequently measured 
at amortised cost using the effective interest rate method 
except where they are identified as a hedged item in a fair 
value hedge any difference between the proceeds net of 
transaction costs and the settlement or redemption of 
borrowings is recognised over the term of the borrowing
bank fees and legal costs associated with the securing of 
external financing are capitalised and amortised over the  
term of the relevant facility all other borrowing costs are 
recognised in the income statement in the period in which 
they are incurred
bank overdrafts that are repayable on demand and form an 
integral part of the group’s cash management are included  
as a component of cash and cash equivalents for the purpose 
of the statement of cash flows overview performance review governance financial statements other information
55
talktalk telecom group plc  annual report 2011
future accounting developments
at the date of authorisation of these financial statements  
the following standards and interpretations which have not 
been applied in these financial statements were in issue  
but not yet effective and in some cases had not yet been 
adopted by the eu
• ias 32 amended ‘classification of rights issues’
•  ifric 19 ‘extinguishing financial liabilities with 
equity instruments’
•  ifric 14 amended ‘prepayments of a minimum 
funding requirement’
• improvements to ifrss may 2010
the directors do not expect that the adoption of the other 
standards listed above will have a material impact on the 
financial statements of the group in future periods
goodwill
determining whether goodwill is impaired requires estimation 
of the value in use of the cgus to which the goodwill has been 
allocated the value in use calculation involves estimation 
of both the future cash flows of the cgus and the selection 
of appropriate discount rates to use to calculate present 
values note 11 the carrying value of goodwill is £471m 
2010  £470m as restated at the balance sheet date 
intangible assets and property plant and equipment
the assessment of the useful economic lives of these assets 
requires judgement depreciation and amortisation is charged 
to the income statement based on the useful economic life 
selected this assessment requires estimation of the period 
over which the group will benefit from the assets
determining whether the carrying amount of these assets 
has any indication of impairment also requires judgement 
if an indication of impairment is identified further judgement 
is required to assess whether the carrying amount can be 
supported by the value in use of the cgu that the asset is 
allocated to the value in use calculation involves estimation of 
both the future cash flows of the cgus and the selection 
of appropriate discount rates to use to calculate present 
values note 11 
trade and other receivables
judgement is required in order to evaluate the likelihood  
of collection of customer debt after revenue has been 
recognised and hence the value of the bad and doubtful  
debt these provisions are based on historical trends in  
the percentage of debts which are not recovered
deferred taxation
the extent to which tax losses can be utilised depends  
on the extent to which taxable profits are generated in the 
relevant jurisdictions for the foreseeable future and on  
the tax legislation then in force and as such the value of 
associated deferred tax assets is uncertain
provisions
the group’s reorganisation and other provisions are based  
on the best information available to management at the 
balance sheet date however the future costs assumed  
are inevitably only estimates which may differ from those 
ultimately incurred 56
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
2 segmental reporting
ifrs 8 ‘operating segments’ requires the segmental information presented in the financial statements to be that used by the 
chief operating decision maker to evaluate the performance of the business and decide how to allocate resources the group 
has identified the board as its chief operating decision maker the board considers the results of the business as a whole when 
assessing the performance of the business and making decisions about the allocation of resources accordingly the group has 
one operating segment
during the previous financial year the group incurred costs in respect of cpw ‘cpw costs’ these costs are not reflective of the 
ongoing costs of the group and have been disclosed separately the costs of the demerger note 9 are shown within cpw costs
operations cpw costs total
year ended 31 march 2011 £m £m £m
revenue 1765 – 1765
headline ebitda 276 – 276
depreciation 57 – 57
amortisation of operating intangibles 26 – 26
share of results of joint venture 1 – 1
headline profit before interest and taxation 192 – 192
amortisation of acquisition intangibles and exceptional amortisation 66 – 66
exceptional items – operating expenses note 9 48 – 48
exceptional items – depreciation note 9 3 – 3
operating profit 75 – 75
operations cpw costs total
year ended 31 march 2010 £m £m £m
revenue 1686 – 1686
headline ebitda 230 9 221
depreciation 46 – 46
amortisation of operating intangibles 24 – 24
headline profit before interest and taxation 160 9 151
amortisation of acquisition intangibles and exceptional amortisation 87 – 87
exceptional items – operating expenses note 9 29 18 47
exceptional items – depreciation note 9 1 – 1
operating profit 43 27 16
 comprises £62m of amortisation on acquisition intangibles 2010  £83m and £4m of exceptional amortisation 2010  £4m note 9
the group’s revenue is split by broadband nonbroadband and corporate products broadband and nonbroadband comprise 
residential customers and business customers that receive similar products
 
2011 
£m
2010 
£m
broadband 1247 1086
nonbroadband 189 273
corporate 329 327
1765 1686
the group has no material overseas operations as a result a split of revenue and total assets by geographical location has 
not been disclosed the group entered into an agreement to sell its operations in belgium and ireland on 31 march 2010 
and 19 april 2010 respectively these operations contributed revenue of £16m in the year ended 31 march 2010 to the 
nonbroadband channel overview performance review governance financial statements other information
57
talktalk telecom group plc  annual report 2011
3 profit before interest and taxation
group profit before interest and taxation is stated after charging
2011 
£m
2010 
£m
depreciation of property plant and equipment 57 46
amortisation of acquisition intangibles 62 83
amortisation of operating intangible fixed assets 26 24
impairment of property plant and equipment 3 1
impairment of operating intangible fixed assets 4 4
impairment loss recognised on trade receivables 33 25
sharebased payments 4 4
staff costs excluding sharebased payments 154 164
cost of inventories recognised in expenses 19 20
rentals under operating leases – property 9 6
rentals under operating leases – other 57 40
4 employee costs
the average number of employees including executive directors was 
2011 
number
2010 
number
administration 1988 2346
sales and customer management 2089 2226
4077 4572
the aggregate remuneration recognised in respect of these employees in the income statement comprised
2011 
£m
2010 
£m
wages and salaries 135 145
social security costs 16 16
other pension costs note 26 3 3
154 164
sharebased payments note 5 4 4
158 168
compensation earned by key management is analysed below the key management personnel comprised the talktalk group 
executive board and board of directors in the current year and the talktalk group executive board and an allocation of the 
cpw directors in the prior year
2011 
£m
2010 
£m
salaries and fees 34 20
performance bonuses 24 25
benefits 01 01
pension costs 02 02
sharebased payments 23 15
84 63 58
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
5 sharebased payments
the group issues equity settled sharebased payments to certain employees through the schemes set out in the analysis below
the group’s share schemes are the discretionary share option plan ‘dsop’ value enhancement scheme ‘ves’ and 
saveasyouearn scheme ‘saye’ these schemes are disclosed within section a of this note to the accounts 
in addition the group has a number of legacy carphone warehouse group schemes which are disclosed within section  
b of this note to the accounts 
the group recognised a charge of £4m in the year ended 31 march 2011 2010  £4m in respect of equity settled sharebased 
payments in the prior year a charge of £3m was taken directly to reserves in respect of the cpw ttg ves as part of the 
demerger accounting 
in order to aid the user of the accounts the dilutive effect of each of the talktalk group schemes and legacy schemes 
has been presented this has been calculated using an average share price for the financial year of £138 2010  £127
a talktalk telecom group plc schemes
during the year the group introduced the following two schemes
i the dsop the scheme uses share options to provide longterm incentives to senior management awards made under the 
dsop are subject to tsr performance targets and are measured over an initial performance period to 29 march 2013 and a 
subsequent performance period to 29 march 2014 options are forfeited if an employee leaves the group before the options vest 
ii the saye share option scheme the scheme permits the granting of options to employees linked to a bank saye contract for 
a term of three or five years contributions from uk employees range from £5 to £250 and ireland employees range from €12 to 
€500 per month options may be exercised at the end of the three or five year period at an exercise price of £102 per share 
dsop saye
2011 
number
million
2011
waep
£
2011 
number
million
2011
waep
£
outstanding at the beginning of the year – – – –
granted during the year 29 125 8 102
forfeited during the year
5 127 1
102
outstanding at the end of the year 24 124 7 102
exercisable at the end of the year – – – –
weighted average remaining contractual life years 90 31
dilutive effect millions 05 06
valuation method monte carlo black scholes
share price pence 132 124
exercise price pence 127 102
expected volatility 374 424
expected exercise years 65 37
risk free rate 34 19
expected dividend yield 38 37
fair value of options granted £m 9m 3m
 the difference in the schemes reflects the timing of expected exercise date
no options were exercisable either during the year or at the year end of the dsop options granted 472000 were nil priced  overview performance review governance financial statements other information
59
talktalk telecom group plc  annual report 2011
ttg ves
the ttg ves enables participants to share in up to 7 of any increase in the value of the group over an opening valuation 
representing invested capital at 1 april 2009 adjusted as relevant for changes in invested capital since that date the incremental 
value is measured after a minimum annual rate of return of 7 on this invested capital the group advanced loans to 
participants to enable them to purchase a shares in talktalk group limited the holding company of the group’s operating 
business the group has an obligation to acquire these shares if performance conditions are met to provide to participants 
the share of value described above these performance conditions are measured over an initial performance period to 
september 2012 at which point participants have a put option over 60 of their shares and a subsequent performance 
period to september 2013 at which point participants have a put option over the remainder of their shares if the 
performance criteria are not met the a shares will have no value 
the ttg ves has a potentially dilutive effect of 22 million shares 2010  28 million shares which has been included in the 
diluted eps calculation
the fair value of the schemes which has performance targets based on the growth of the market capitalisation of the group 
was estimated at the date of grant using a monte carlo model to initially value the a shares and then a black scholes model 
to calculate the option value the model combines the valuation price of a share at the date of grant with the probability 
of meeting performance criteria based on the expected value of the group at the date of grant discounted for the lack of 
marketability of the shares
the following assumptions were used in the monte carlo model for the a shares awarded in the year
• volatility of 22
• a risk free rate ranging from 05 to 27 and 
• a dividend yield of between 0 and 5 in each of the three years to september 2013
the following assumptions were used in the black scholes model for the a shares awarded in the year
• equity volatility of 1499 and 1390 for september 2012 and september 2013 options respectively 
• a risk free rate of 19 and 23 for september 2012 and september 2013 options respectively and 
• a dividend yield of nil
b legacy carphone warehouse schemes
cpw ttg ves
the cpw ttg ves enables participants to share in up to 224 of any increase in the value of the group over an opening 
valuation representing invested capital at 1 april 2009 adjusted as relevant for changes in invested capital since that date  
the incremental value is measured after a minimum annual rate of return of 7 on this invested capital the value of the cpw 
ttg ves pool is adjusted on vesting for any change in the value of the group’s share price from the date on which the shares 
were issued the group’s opening share price for this purpose represents an allocation of the share price of cpw at that 
date based on the market capitalisations of the group and carphone warehouse group plc in the 5 days following demerger 
cpw advanced loans to participants to enable them to purchase c shares in talktalk group limited the holding company 
of the group’s operating businesses the group has an obligation to acquire these shares if certain performance conditions 
are met to provide to participants the share of value described above these performance conditions are measured over an 
initial performance period to september 2012 at which point participants have a put option over 60 of their shares and 
a subsequent performance period to september 2013 at which point participants have a put option over the remainder 
of their shares if the performance criteria are not met the c shares will have no value 
the cpw ttg ves has a potentially dilutive effect of 11 million shares 2010  10 million shares which has been included  
in the diluted eps calculations
the fair value of the cpw ttg ves c shares was calculated using the same assumptions as for the ttg ves a shares  
see above 
the below table summarise the other legacy cpw schemes the prior year waep used throughout this analysis is that of the 
sharebased payments as adjusted to reflect the relative value of the group within cpw at demerger the prior year waep 
is therefore not necessarily representative of the waep that might apply on an ongoing basis 60
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
5 sharebased payments continued
performance share plan
1
2011 
number
million
2011
waep
£
2010 
number
million
2010
waep
£
outstanding at the beginning of the year 13 – 22 –
forfeited during the year 8 – 2 –
exercised during the year
1 – 7
–
outstanding at the end of the year 4 – 13 –
exercisable at the end of the year 4 – 6 –
weighted average contract life years 44 66
options exercised in the year weighted average market price £ 136 111
dilutive effect millions 56 59
esos
2
2011 
number
million
2011
waep
£
2010 
number
million
2010
waep
£
outstanding at the beginning of the year 5 078 8 060
exercised during the year
2 105 3
055
outstanding at the end of the year 3 053 5 066
exercisable at the end of the year 3 053 5 066
weighted average contract life years 16 17
options exercised in the year weighted average market price £ 135 113
dilutive effect millions 24 21 overview performance review governance financial statements other information
61
talktalk telecom group plc  annual report 2011
other employee share option schemes
3
2011 
number
million
2011
waep
£
2010 
number
million
2010
waep
£
outstanding at the beginning of the year 7 051 9 063
forfeited during the year – – 2 –
exercised during the year
4 051 –
–
outstanding at the end of the year 3 051 7 051
exercisable at the end of the year 3 051 – –
weighted average contract life years 77 87
options exercised in the year weighted average market price £ 128 110
dilutive effect millions 35 43
total dilutive effect of legacy schemes 115 123
1  for awards made in july 2004 these performance conditions have been met and the options vested for awards made in the years ended 31 march 2007 
and 31 march 2008 the performance conditions were not met and lapsed during the year
2  the esos options have already vested if the options remain unexercised after a period of ten years from the date of grant the options expire the options 
analysis includes 2 million 2010  3 million options that were granted before 7 november 2002 in accordance with ifrs2 ‘sharebased payment’ no cost 
has been recognised in respect of these options
3  these awards are subject to initial performance conditions principally in relation to earnings and cash generation over a period to march 2010 
these options have all vested 
share gift
in december 2008 36 million shares were gifted by carphone warehouse’s employee benefit trust to certain senior 
employees of the carphone warehouse group the shares were restricted until 30 june 2010 when all performance  
criteria were achieved  62
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
6 finance costs and investment revenue
finance costs are analysed as follows
2011 
£m
2010 
£m
interest on bank loans and overdrafts 13 7
facility fees and similar charges 3 1
unwinding of discount on provisions 2 2
demerger fees note 9 – 1
18 11
investment revenue is analysed as follows
2011 
£m
2010 
£m
interest on loans to related parties – 5
other interest receivable – 1
– 6
loans to carphone warehouse group plc were settled as part of the demerger note 28
7 taxation
the tax charge comprises
2011 
£m
2010 
£m
current tax
uk corporation tax – 13
overseas tax – 1
– 14
adjustments in respect of prior years
uk corporation tax 18 2
total current tax 18 12
deferred tax
origination and reversal of timing differences 18 5
effect of change in tax rate 9 –
adjustments in respect of prior years – reclassification from current tax 18 –
adjustments in respect of prior years – deferred tax recognised 5 3
total deferred tax 40 2
total tax charge 22 14
the tax charge on headline earnings for the year ended 31 march 2011 is £52m 2010  £41m representing an effective tax  
rate on pretax profits of 30 2010  28 the tax charge on statutory earnings for the year ended 31 march 2011 is £22m 
2010  £14m the reconciliation between the headline and statutory tax charge is shown in note 9 
there has been a reclassification of £18m 2010  nil in the year from current tax to deferred tax to better reflect expected 
utilisation of losses overview performance review governance financial statements other information
63
talktalk telecom group plc  annual report 2011
the principal differences between the tax charge and the amount calculated by applying the standard rate of uk corporation tax 
of 28 2010  28 to the profit before tax are as follows
2011 
£m
2010 
£m
profit before tax 57 11
tax at 28 2010  28 16 3
items attracting no tax relief or liability 2 16
effect of change in tax rate 9 –
adjustments in respect of prior years 5 5
total tax charge through income statement 22 14
tax on items recognised directly in retained earnings and other reserves are as follows
2011 
£m
2010 
£m
deferred tax credit charge 2 1
total tax charge through retained earnings and other reserves 20 15
the movement for both the year ended 31 march 2011 and 31 march 2010 relates to sharebased payments
the deferred tax assets recognised by the group and movements thereon during the year are as follows 
sharebased 
payments
timing 
differences  
on capitalised  
costs tax losses
timing 
differences on 
acquisition 
intangibles
other timing 
differences total
£m £m £m £m £m £m
at 1 april 2010 2 85 85 19 2 155
charge credit to the income statement 1 9 40 8 2 40
credit to reserves 2 – – – – 2
acquisition of subsidiaries – – – 1 – 1
at 31 march 2011 3 76 45 12 4 116
sharebased 
payments
timing 
differences  
on capitalised  
costs tax losses
timing 
differences on 
acquisition 
intangibles
other timing 
differences total
£m £m £m £m £m £m
at 1 april 2009 2 29 74 3 – 108
credit charge to the income statement 1 14 24 5 2 2
charge to reserves 1 – – – – 1
acquisition of subsidiaries – 42 35 27 – 50
at 31 march 2010 2 85 85 19 2 155
no deferred tax assets and liabilities have been offset in either year except where there is a legal right to do so in the  
relevant jurisdictions
during the year two reductions in the uk statutory rate of corporation tax were enacted bringing the rate down from 
28 to 26 accordingly the tax assets and liabilities recognised at 31 march 2011 take account of these changes 
this has resulted in a tax charge to the income statement as the value of the group’s tax assets has been reduced  64
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
7 taxation continued
at 31 march 2011 the group had unused tax losses of £1016m 2010  £957m available for offset against future taxable profits 
a deferred tax asset of £45m 2010  £85m has been recognised in respect of £173m 2010  £304m of such losses based on 
expectations of recovery in the foreseeable future
no deferred tax asset has been recognised in respect of the remaining £843m 2010  £653m as there is insufficient evidence 
that there will be suitable taxable profits against which these losses can be recovered all losses may be carried forward indefinitely
8 dividends
the following dividends were paid by the group to its shareholders
2011 
£m
2010 
£m
ordinary dividends
interim dividend for the year ended 31 march 2011 of 170p per ordinary share 15 –
final dividend for the year ended 31 march 2009 of 300p per ordinary share – 27
interim dividend for the year ended 31 march 2010 of 145p per ordinary share – 13
total ordinary dividends 15 40
special dividends relating to the demerger
special interim dividend for the year ended 31 march 2010 of 320p per ordinary share – 29
demerger dividend for the year ended 31 march 2010 of 1988p per ordinary share – 182
total special dividends – 211
total dividends paid 15 251
the final dividend for the year ended 31 march 2011 is 390p per ordinary share on approximately 909 million shares £35m 
which was approved by the board on 18 may 2011 and has not been included as a liability as at 31 march 2011
in the prior year the ordinary dividends were paid by cpw to its shareholders 
the special interim dividends of £29m were paid by cpw to its shareholders the demerger dividends of £182m were paid 
by cpw to carphone warehouse group plc as part of the demerger transaction
the group esot has waived its rights to receive dividends in the current and prior year and this is reflected in the analysis above
9 reconciliation of headline information to statutory information
ebitda
profit before 
interest and tax
profit  
before tax
profit for  
the year
year ended 31 march 2011
 
£m
 
£m
 
£m
 
£m
headline results 276 192 174 122
exceptional items – operating expenses a 12 12 12 9
exceptional items – operating expenses b 36 36 36 28
exceptional items – depreciation b – 3 3 2
exceptional items – amortisation b – 4 4 3
amortisation of acquisition intangibles d – 62 62 45
statutory results 228 75 57 35 overview performance review governance financial statements other information
65
talktalk telecom group plc  annual report 2011
ebitda
profit before 
interest and tax
profit  
before tax
profit for  
the year
year ended 31 march 2010
 
£m
 
£m
 
£m
 
£m
headline results 221 151 147 106
exceptional items – operating expenses b 29 29 29 24
exceptional items – operating expenses c 18 18 18 17
exceptional items – depreciation b – 1 1 1
exceptional items – amortisation b – 4 4 3
amortisation of acquisition intangibles d – 83 83 63
exceptional items – interest c – – 1 1
statutory results 174 16 11 3
headline information is provided because the directors consider that it provides assistance in understanding underlying performance
a operating efficiencies
on 26 january 2011 a major restructure of the group was announced to integrate technology and it capabilities and consolidate 
back office functions the reorganisation will principally result in a reduction in headcount operating reorganisation costs of 
£12m were incurred during the year ended 31 march 2011 principally comprising redundancies and consulting costs 
a total taxation credit of £3m has been recognised in respect of these costs
b one company integration
the one company integration was implemented during the prior year following the acquisition of tiscali uk on 3 july 2009  
the group revisited its overall operating structure in order to both integrate the tiscali business and deliver efficiencies in 
existing operations the program generated significant synergies through the elimination of duplicated costs and migration 
of customers onto the group’s unbundled network 
the program included network integration costs related to the termination of contracts and the write down of associated assets 
principally of backhaul circuits this comprised both those acquired with the tiscali business and those previously contracted 
for by the group prior to its acquisition of tiscali these contracts were terminated as it was necessary to replace the previous 
backhaul solutions in order to provide one combined backhaul solution for the group and to create a higher capacity network 
operating reorganisation costs of £40m were incurred during the year ended 31 march 2011 principally comprising redundancies 
and site closures an integration project team and consulting costs 2010  £29m costs of £7m were incurred in respect of 
redundant software and fixed asset write downs 2010  £5m
a total taxation credit of £10m has been recognised in respect of these costs 2010  £6m
a credit of £4m has been recognised in respect of recycling of translation reserves in relation to legal entities which have  
been liquidated no taxation has been recognised in respect of this credit
c demerger and other separation costs
during the year ended 31 march 2010 the carphone warehouse demerged the company and it was separately listed on the 
london stock exchange the separation required substantial costs to be incurred both for managing the process internally  
for meeting the external requirements for a company to list and for separating from it activities managed by cpw operating 
costs of £18m and banking fees of £1m were incurred a taxation credit of £1m was recognised in respect of these costs
d amortisation of acquisition intangibles
a tax credit at 28 has been recognised in all periods in respect of the amortisation of acquisition intangibles net of any 
adjustments in respect of prior periods this was £17m for the year ended 31 march 2011 2010  £20m 66
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
10 earnings per share
basic and diluted earnings per ordinary share have been calculated in accordance with ias 33 ‘earnings per share’ eps is shown 
on both a headline and statutory basis to assist in the understanding of the underlying performance of the group
2011 
£m
2010 
£m
headline earnings note 9 122 106
statutory earnings 35 3
weighted average number of shares millions
shares in issue 914 914
less weighted average holdings by group esot 7 16
for basic eps 907 898
dilutive effect of share options 45 50
for diluted eps 952 948
2011 
pence
2010 
pence
basic earnings loss per share
headline 135 118
statutory 39 03
2011 
pence
2010 
pence
diluted earnings loss per share
headline 128 112
statutory 37 03
in the prior year the group did not exist in the form that arose on demerger the average actual shares in issue during the prior year 
do not provide a meaningful basis for calculating eps the prior year eps has therefore been calculated based on the number of 
cpw shares in issue until demerger the number of the company’s shares in issue from that date and the shareholding of the group 
esot during the prior year
diluted eps has been calculated based on options held over cpw shares during these years and the group’s proportion of the 
cpw share price over that period
the number of shares that could be issued but that are not considered to be dilutive at 31 march 2011 is 27 million 2010  7 million overview performance review governance financial statements other information
67
talktalk telecom group plc  annual report 2011
11 goodwill and other intangible assets
a goodwill
2011 
£m
2010  
as restated
£m
opening net book value 470 304
acquisition of subsidiaries note 13 3 166
disposals note 13 2 –
closing net book value 471 470
the goodwill acquired in business combinations is allocated at acquisition to the cgus that are expected to benefit from that 
business combination the group has two cgus – residential and corporate the group’s shared costs and assets relating 
mainly to infrastructure and central overheads are allocated across the two cgus based on relative size of the value in use 
of the cgu the allocation of goodwill across the cgus is as follows 
2011 
£m
2010  
as restated
£m
residential 337 338
corporate 134 132
471 470
 the prior year balance sheet has been restated to reflect the finalisation of the tiscali uk and uk telco acquisition purchase prices note 29
the group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired 
this review is performed at a cgu level 
the recoverable amounts of the cgus are determined from value in use calculations the group prepares cash flow forecasts 
derived from the most recent financial budgets approved by the board or management for the next three years and extrapolates 
cash flows out for the following 17 years the key assumptions used are as follows
•  longterm growth rates
longterm revenue growth rates applied are based on the growth rate for the uk per the oecd the rate applied in the 
current year was 18 2010  18
•  discount rate
the underlying discount rate for each cgu is based on the uk tenyear gilt rate adjusted for an equity risk premium and  
the systematic risk of the cgu the average pretax rate for both cgus used to discount the forecast cash flows is 91 
2010  88 the assumptions used in the calculation of the cgu’s discount rate are benchmarked to externally available 
data the same discount rate has been applied to both cgus due to the similarity of risk factors and geographical location 
•  capital expenditure
forecast capital expenditure is based on senior management expectations of required future investment in the network  
and current run rate of expenditure
•  customer factors
the key assumptions for the forecast cash flows of each of the cgus are based on expected customer growth rates arpu 
direct costs including acquisition costs and change in product mix the value assigned to each of these assumptions has 
been determined based on the extrapolation of historical trends in the group and external information on expected trends 
of future market developments 
sensitivity to changes in assumptions 
sensitivity analysis has been performed for each key assumption and the directors have not identified any reasonably possible 
material changes in the key assumptions that would cause the carrying value of goodwill to exceed the recoverable amount 68
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
11 goodwill and other intangible assets continued
b other intangible assets
other intangible assets are analysed as follows
operating 
intangibles
acquisition 
intangibles
total other 
intangibles
£m £m £m
opening balance at 1 april 2010 126 190 316
additions 28 3 31
amortisation 26 62 88
impairment charges 4 – 4
closing balance at 31 march 2011 124 131 255
cost gross carrying amount 207 328 535
accumulated amortisation 83 197 280
closing balance at 31 march 2011 124 131 255
operating 
intangibles
acquisition 
intangibles
total other 
intangibles
£m £m £m
opening balance at 1 april 2009 114 176 290
additions 35 – 35
acquisition of subsidiaries 5 97 102
amortisation 24 83 107
impairment charges 4 – 4
closing balance at 31 march 2010 126 190 316
cost gross carrying amount 179 333 512
accumulated amortisation 53 143 196
closing balance at 31 march 2010 126 190 316
operating intangibles includes internally generated assets of net book value £5m 2010  £6m which are amortised over 
a period of up to five years 
included within operating intangibles are the following assets which are material to the group 
•  trio the customer billing system which has a net book value of £91m 2010  £86m trio is amortised over a period of 
up to eight years depending on the release date of relevant component the weighted average remaining useful economic 
life of the components of trio is six years 
acquisition intangibles are removed from cost in the analysis above once fully amortised overview performance review governance financial statements other information
69
talktalk telecom group plc  annual report 2011
acquisition intangibles are analysed as follows
customer 
bases
customer 
revenue share 
agreements other total
£m £m £m £m
opening balance at 1 april 2010 188 – 2 190
acquisition of subsidiaries 3 – – 3
amortisation 60 – 2 62
closing balance at 31 march 2011 131 – – 131
cost gross carrying amount 328 – – 328
accumulated amortisation 197 – – 197
closing balance at 31 march 2011 131 – – 131
customer 
bases
customer 
revenue share 
agreements other total
£m £m £m £m
opening balance at 1 april 2009 164 9 3 176
acquisition of subsidiaries 92 – 5 97
amortisation 68 9 6 83
closing balance at 31 march 2010 188 – 2 190
cost gross carrying amount 328 – 5 333
accumulated amortisation 140 – 3 143
closing balance at 31 march 2010 188 – 2 190
customer bases relate primarily to the aol uk internet access business which was acquired in december 2006 and the tiscali 
uk internet access business which was acquired in july 2009 the valuation of customer bases is derived from the discounted 
future cash flows expected from them after a deduction for contributory assets
customer revenue share agreements arose on the acquisition of aol’s uk internet access business and represent rights 
subject to performance criteria to a share of transactional revenues generated by aol access customers and customers on 
aol sites the valuation of these rights was again derived from the discounted future cash flows expected from the agreement 
after a deduction for contributory assets
other acquisition intangibles primarily represents licences to continue to use the aol and tiscali brands valued using the 
relief from royalty method
included within acquisition intangibles are the following assets which are material to the group and their remaining useful 
economic life at 31 march 2011 
•  aol broadband customer base which has a net book value of £69m 2010  £107m and a remaining useful economic 
life of 22 months 2010  34 months and
•  tiscali customer base which has a net book value of £59m 2010  £77m and a remaining useful economic  
life of 39 months 2010  51 months
acquisition intangibles are removed from cost in the analysis above once fully amortised 70
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
12 property plant and equipment
leasehold 
improvements
network 
equipment and 
computer 
hardware
fixtures and 
fittings total
£m £m £m £m
opening balance at 1 april 2010 7 254 1 262
additions – 87 1 88
depreciation 1 55 1 57
impairment charges – 3 – 3
closing balance at 31 march 2011 6 283 1 290
cost gross carrying amount 6 442 6 454
accumulated depreciation and impairment charges – 159 5 164
closing balance at 31 march 2011 6 283 1 290
leasehold 
improvements
network 
equipment and 
computer 
hardware
fixtures and 
fittings total
£m £m £m £m
opening balance at 1 april 2009 3 215 1 219
additions 5 61 1 67
acquisition of subsidiaries – 24 – 24
disposals – 1 – 1
depreciation 1 45 1 47
closing balance at 31 march 2010 7 254 1 262
cost gross carrying amount 8 394 2 404
accumulated depreciation and impairment charges 1 140 1 142
closing balance at 31 march 2010 7 254 1 262
13 noncurrent asset investments
£m
cost and net book value at 1 april 2009 31 march 2010 and 31 march 2011 1
noncurrent asset investments at 31 march 2011 and at 31 march 2010 relate to a 113 interest in shared band limited 
a telecommunications technology provider the group holds a strategic noncontrolling interest these shares are not held 
for trading and accordingly are classified as available for sale the fair value of the shares is based on cost less any provision 
for impairment as the shares are not listed on an exchange and therefore a market price cannot be reliably measured 
a principal group investments
the group has investments in the following subsidiary undertakings which principally affected the profits or losses or net  
assets of the group to avoid a statement of excessive length details of investments which are not significant have been  
omitted all holdings are in equity share capital and give the group an effective holding of 100 on consolidation overview performance review governance financial statements other information
71
talktalk telecom group plc  annual report 2011
name
country of incorporation  
or registration nature of business
talktalk group limited england and wales holding company
talktalk telecom holdings limited england and wales holding company
talktalk communications limited 
formerly opal telecommunications limited england and wales telecommunications
onetel telecommunications limited england and wales telecommunications
talktalk telecom limited england and wales telecommunications
talktalk direct limited england and wales telecommunications
talktalk uk communication services limited england and wales telecommunications
gis telecoms limited england and wales telecommunications
cpw network services limited england and wales telecommunications
tiscali uk limited england and wales telecommunications
 
 directly held by the company
as part of the one company integration the group’s subsidiaries have been reduced from 67 to 39 in the year 
these 28 subsidiaries were either liquidated merged or sold this includes nine overseas entities 
b acquisitions and disposals
i tiscali uk
on 3 july 2009 the group acquired the entire issued share capital of tiscali uk for a gross cash consideration of £238m 
comprising £236m of cash consideration and £2m of fees on 2 august 2010 a net adjustment in respect of working capital 
and customer numbers was agreed between the group and tiscali spa this resulted in an adjustment to goodwill of £14m 
the carrying value of goodwill in the prior year has been restated to £162m in line with the requirements of ias 1 ‘presentation 
of financial statements’ see note 29 there have been no subsequent changes to the fair value adjustments disclosed in the 
nonstatutory financial statements for the year ended 31 march 2010
there were net cash inflows of £14m in the year ended 31 march 2011 in respect of the settlement of the adjustment to the 
consideration net cash outflows in the year ended 31 march 2010 comprised gross cash consideration of £238m offset by 
£3m of cash acquired
ii other acquisitions
the group acquired opal 2cch limited formerly ‘2 circles communications holdings limited’ and southern communications 
limited for cash consideration net of cash acquired of £2m and deferred consideration of £2m which resulted in acquisition 
intangibles of £2m and goodwill of £3m the impact of these acquisitions on the results of the group for the year ended 
31 march 2011 had the businesses been acquired on 31 march 2010 is immaterial the group has recognised a gain of 
£1m within its income statement in respect of the increase in fair value of the equity interest held in opal 2cch limited at 
the acquisition date the goodwill of £3m was recognised relating to the future opportunities arising from the nature of the 
businesses and fit with the group’s existing operations
the group paid cash consideration of £1m in respect of v networks limited deferred consideration and dealer buyouts 
which resulted in goodwill and acquisition intangibles of £1m 
in the year ended 31 march 2010 the group acquired uk telco limited for cash consideration of £5m and deferred consideration 
of £1m as restated which resulted in acquisition intangibles of £2m and goodwill of £4m as restated the £1m deferred 
consideration was paid in the year ended 31 march 2011 the impact of this acquisition on the results of the group for the  
year ended 31 march 2010 and had the business been acquired on 31 march 2009 were immaterial the goodwill of £4m  
was recognised relating to the future opportunities arising from the nature of uk telco gb limited’s business and fit with  
the group’s existing operations
iii disposals
on 19 april 2010 the group entered into an agreement to sell its operations in ireland for a consideration of £4m the profit  
on sale of the business has been offset by the impairment of goodwill recognised on the acquisition of tele2 ireland in 2006  
of £2m and closure costs for the business of £2m resulting in nil profit or loss on disposal  72
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
14 interest in joint venture
on 10 september 2010 the group entered into a joint venture agreement with the british broadcasting corporation itv 
broadcasting limited british telecom plc channel four television corporation arqiva limited and channel 5 broadcasting 
limited to form youview tv limited formerly canvas pro tem limited the group holds 143 of the ordinary share capital  
of youview tv limited the joint venture has been set up in order to develop a new freetoair internetconnected tv service  
to uk homes in 2012 the table below sets out the net additions in the year
net assets
  
£m
opening balance at 1 april 2010 –
initial recognition of investment –
additions 5
share of results 1
closing balance at 31 march 2011 4
the group’s share of the results assets and liabilities of its joint venture are as follows
group share of results of joint venture
2011 
£m
2010 
£m
revenue – –
expenses 1 –
loss before taxation 1 –
taxation – –
loss after taxation 1 –
group share of net assets of joint venture
2011 
£m
2010 
£m
noncurrent assets
3
–
cash and overdrafts net 2 –
other liabilities 1 –
net assets 4 –
at 31 march 2011 the group had committed to pay £14m to youview tv limited payable over the three year period to 31 march 2014
15 inventories
2011 
£m
2010 
£m
goods for resale 3 2
the difference between the balance sheet value of inventory and its replacement cost is considered by the directors not to  
be material overview performance review governance financial statements other information
73
talktalk telecom group plc  annual report 2011
16 trade and other receivables
trade and other receivables comprise
2011 
£m
2010  
as restated
£m
current – trade and other receivables
trade receivables – gross 109 160
less provision for impairment 31 37
trade receivables – net 78 123
other receivables 44 31
prepayments and accrued income 33 26
trade and other receivables 155 180
loans to related parties 2 3
157 183
 the prior year balance sheet has been restated to reflect the finalisation of the tiscali uk acquisition purchase price note 29
the directors estimate that the carrying amount of trade receivables approximates to their fair value
loans to related parties at 31 march 2011 comprise a loan to future office communications limited 2010  opal 2cch limited 
and ecocall limited an associated company of the group
the average credit period taken on trade receivables calculated by reference to the amount owed at the year end as a proportion 
of total revenue in the year adjusted to take account of the timing of acquisitions was 19 days 2010  29 days
the group’s trade receivables are denominated in the following currencies
2011 
£m
2010 
£m
uk sterling 102 150
other 7 10
109 160
the ageing of gross trade receivables is as follows
2011 
£m
2010 
£m
not yet due 59 102
0 to 2 months 20 22
2 to 4 months 10 8
over 4 months 20 28
109 160
the ageing of the provision for impairment of trade receivables is as follows
2011 
£m
2010 
£m
not yet due 3 2
0 to 2 months 5 7
2 to 4 months 6 6
over 4 months 17 22
31 37 74
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
16 trade and other receivables continued
movements in the provisions for impairment of trade receivables are as follows
2011 
£m
2010 
£m
opening balance 37 19
charged to the income statement 33 25
receivables written off as irrecoverable 39 23
acquisition of subsidiaries – 16
31 37
trade receivables of £22m 2010  £23m were past due but not impaired these balances primarily relate to residential and 
corporate fixed line customers the group has made provisions based on historical rates of recoverability and all unprovided 
amounts are considered to be recoverable the ageing analysis of these trade receivables is as follows
2011 
£m
2010 
£m
not yet due – –
0 to 2 months 15 15
2 to 4 months 4 2
over 4 months 3 6
22 23
17 trade and other payables
2011 
£m
2010  
as restated
£m
trade payables 112 115
other taxes and social security costs 33 26
other payables 34 23
accruals and deferred income 197 236
376 400
 the prior year balance sheet has been restated to reflect the finalisation of the uk telco acquisition purchase price note 29
the average credit period taken on trade payables calculated by reference to the amounts owed at the balance sheet date  
as a proportion of the amounts invoiced by suppliers in the year adjusted to take account of the timing of acquisitions was  
24 days 2010  25 days
the directors consider that the carrying amount of trade and other payables approximates to their fair value overview performance review governance financial statements other information
75
talktalk telecom group plc  annual report 2011
18 cash and cash equivalents loans and other borrowings
a cash and cash equivalents are as follows
2011 
£m
2010 
£m
cash at bank and in hand 1 1
the effective interest rate on bank deposits and money market funds was 06 2010  04
b loans and other borrowings comprise
2011 
£m
2010 
£m
current 
bank overdrafts 9 9
other uncommitted bank loans 35 10
44 19
maturity
2011 
£m
2010 
£m
noncurrent
£100m term loan 2015 100 100
£550m revolving credit facility 2013 295 390
395 490
details of the current and noncurrent borrowing facilities of the group for the year are set out below
bank overdrafts
overdraft facilities are used to assist in shortterm cash management these uncommitted facilities bear interest at a margin  
over the bank of england base rate
£100m term loan
the group has a committed term loan of £100m which matures in march 2015 the interest rate payable in respect of drawings 
under this facility is at a margin over libor for the relevant currency and for the appropriate period the actual margin applicable 
to any drawing depends on the ratio of net debt to ebitda calculated in respect of the most recent accounting period covenants 
included in this facility restrict the ratio of net debt to ebitda and require minimum levels of interest cover and fixed charges 
interest and operating lease expenditure cover the group was in compliance with these covenants at the end of the current 
and prior year during the year the final maturity date on the loan was extended from 2013 to 2015
£550m revolving credit facility “rcf”
the group has a committed rcf of £550m which matures in march 2013 the interest rate payable in respect of drawings 
under this facility is at a margin over libor for the relevant currency and for the appropriate period the actual margin 
applicable to any drawing depends on the ratio of net debt to ebitda calculated in respect of the most recent accounting 
period utilisation and nonutilisation fees are payable under this facility covenants included in this facility restrict the ratio of 
net debt to ebitda and require minimum levels of interest cover and fixed charges interest and operating lease expenditure 
cover the group was in compliance with these covenants at the end of the year
  76
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
18 cash and cash equivalents loans and other borrowings continued
borrowing facilities
the group had undrawn committed borrowing facilities at the end of the year in respect of which all conditions precedent had 
been met as follows
maturity
2011 
£m
2010 
£m
undrawn available committed facilities 2013 255 160
the book value and fair value of the group’s loans and other borrowings all of which are in sterling are as follows
2011 
£m
2010 
£m
less than 1 year 44 19
1 to 2 years 295 –
2 to 3 years – 490
3 to 4 years 100 –
439 509
securities and guarantees
none of the borrowings are secured over group assets although some guarantees are given by group companies these 
guarantees are to cover commercial obligations and as such create no additional credit risk
19 financial risk management and derivative financial instruments
the book value and fair value of the group’s financial assets liabilities and derivative financial instruments excluding the 
group’s loans and other borrowings shown above are as follows
book and fair value
2011 
£m
2010  
as restated
£m
cash and cash equivalents 1 1
trade and other receivables 155 180
noncurrent investments and investment in joint venture 5 1
trade and other payables 376 400
loans to related parties 2 3
 the prior year balance sheet has been restated to reflect the finalisation of the tiscali uk and uk telco acquisition purchase price note 29
a financial instruments
the group’s activities exposed it to a variety of financial risks including market risk such as currency risk and interest rate risk credit 
risk and liquidity risk the group treasury function used certain financial instruments to mitigate potential adverse effects on the 
group’s financial performance from these risks these financial instruments primarily consisted of bank loans interest rate swaps 
and foreign exchange swaps other products such as currency options can also be used depending on the risks to be covered but 
have not been used in the current or preceding financial year the group does not trade or speculate in any financial instruments overview performance review governance financial statements other information
77
talktalk telecom group plc  annual report 2011
b embedded derivatives
no contracts with embedded derivatives have been identified and accordingly no such derivatives have been accounted  
for separately
c foreign exchange risk
the group uses forward currency contracts to hedge transactional exposures which arise mainly through cost of sales and 
operating expenses and are primarily denominated in euro and us dollar the group also uses shortterm currency swaps  
for liquidity management at 31 march 2011 the sterling value of outstanding currency contracts was £23m 2010  £49m 
borrowings and foreign exchange contracts are sensitive to movements in foreign exchange rates this sensitivity can be 
analysed in comparison to year end rates adjusted for funding to related parties and assuming all other variables remain 
constant as follows 
2011 
£m
2010 
£m
10 movement in the uk sterlingeuro exchange rate
income statement movement 2 –
other equity movement – –
the effect of foreign exchange derivatives on borrowings at the year end was as follows
uk sterling euro other total
£m £m
 
£m
 
£m
2011
borrowings before derivatives 439 – – 439
derivative 23 23 – –
416 23 – 439
 
during the year the group used derivatives for management of foreign currency cash balances held by overseas subsidiaries 
which were inherited from cpw on demerger
uk sterling euro other total
£m £m
 
£m
 
£m
2010
borrowings before derivatives 509 – – 509
derivative 41 38 3 –
468 38 3 509
d interest rate risk
the group’s interest rate risk arises primarily from cash cash equivalents and borrowings all of which are at floating rates of 
interest and thus expose the group to cash flow interest rate risk these floating rates are linked to libor and other interest  
rate bases as appropriate to the instrument and currency future cash flows arising from these financial instruments depend  
on interest rates and periods for each loan or rollover 78
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
19 financial risk management and derivative financial instruments continued
cash and borrowings as well as some foreign exchange products are sensitive to movements in interest rates and such 
movements have been analysed in the table below by calculating the effect on the income statement and equity of one 
percentage point movement in the interest rate for the currencies in which most group cash and borrowings are denominated 
funding to related parties has been offset against gross borrowings in calculating these sensitivities this annualised analysis 
has been prepared on the assumption that the year end positions prevail throughout the year and therefore may not be 
representative of fluctuations in levels of borrowings
2011 
£m
2010 
£m
1 movement in the uk sterling interest rate
income statement movement 5 5
other equity movement – –
e liquidity risk
the group manages its exposure to liquidity risk by regularly reviewing the long and shortterm cash flow projections for the 
business against facilities and other resources available to it headroom is assessed based on historical experience as well  
as by assessing current business risks including foreign exchange movements existing facilities do not expire until march 2013 
it is group policy to refinance debt maturities significantly ahead of maturity dates
the table below analyses the group’s financial liabilities into relevant maturity groupings the amounts disclosed in the table 
are the contractual undiscounted cash flows assuming year end interest rates remain constant and that borrowings are paid 
in full in the year of maturity 
less than 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
more than 
 5 years total
£m £m
 
£m £m £m
 
£m
 
£m
2011
loans and other borrowings 54 305 3 103 – – 465
derivative financial instruments – payable 23 – – – – – 23
derivative financial instruments – receivable 23 – – – – – 23
trade and other payables 376 – – – – – 376
less than 1 year 1 to 2 years 2 to 3 years 3 to 4 years 4 to 5 years
more than 
 5 years total
as restated £m £m
 
£m £m £m
 
£m
 
£m
2010 
loans and other borrowings 33 14 504 – – – 551
derivative financial instruments – payable 49 – – – – – 49
derivative financial instruments – receivable 49 – – – – – 49
trade and other payables 400 – – – – – 400
 the prior year balance sheet has been restated to reflect the finalisation of the uk telco acquisition purchase price note 29
f credit risk
the group’s exposure to credit risk is regularly monitored debt investments foreign exchange and derivative transactions are 
all spread amongst a number of banks all of which have short or longterm credit ratings appropriate to the group’s exposures 
trade receivables primarily comprise balances due from residential and corporate fixed line customers and provision is made 
for any receivables that are considered to be irrecoverable overview performance review governance financial statements other information
79
talktalk telecom group plc  annual report 2011
g capital risk management
the group manages its capital to ensure that entities in the group will be able to continue as going concerns while maximising 
the return to stakeholders through the optimisation of the debt and equity balance 
the capital structure of the group consists of debt which includes the borrowings disclosed in note 18 cash and cash equivalents 
and equity attributable to equity holders of the parent comprising issued capital reserves and retained earnings as disclosed 
in notes 21 to 22
the group’s board reviews the capital structure on an annual basis as part of this review the board considers the cost of  
capital and the risks associated with each class of capital the group has a mediumterm target gearing ratio of 75 to 100 
determined as a proportion of net debt to equity the gearing ratio at 31 march 2011 of 106 2010  130 was marginally 
above the higher end of the target range demonstrating progress towards our mediumterm target 
the gearing ratio at the year end is as follows
2011 
£m
2010 
£m
debt 439 509
cash and cash equivalents 1 1
net debt 438 508
equity 415 392
net debt to equity ratio 106 130
20 provisions
2011 
£m
2010 
£m
operating efficiencies 12 –
one company integration 10 14
property 9 9
contract and other 15 24
46 47
2011 
£m
2010 
£m
current 32 29
noncurrent 14 18
46 47 80
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
20 provisions continued
operating 
efficiencies
one company 
integration property
contract and 
other total
 
£m
 
£m
 
£m
 
£m
 
£m
2011
opening balance – 14 9 24 47
charged to income statement 12 6 1 – 19
utilised in the year – 10 2 10 22
unwinding of discount – – 1 1 2
12 10 9 15 46
operating 
efficiencies
one company 
integration property
contract and 
other total
 
£m
 
£m
 
£m
 
£m
 
£m
2010
opening balance – 6 – 2 8
charged to income statement – 11 – – 11
acquisition of subsidiaries – – 10 41 51
utilised in the year – 3 2 19 24
released in the year – – – 1 1
unwinding of discount – – 1 1 2
– 14 9 24 47
provisions are categorised as follows
a operating efficiencies 
operating efficiencies provisions relate principally to redundancy costs note 9 and are only recognised where plans 
are demonstrably committed and where appropriate communication to those affected has been undertaken at the 
balance sheet date these provisions are typically expected to be utilised over the 12 months following announcement 
of the reorganisation 
b one company integration
one company provisions relate principally to redundancy costs note 9 and are only recognised where plans are demonstrably 
committed and where appropriate communication to those affected has been undertaken at the balance sheet date and 
onerous contract costs where a decision has been made to exit a contract as part of the one company reorganisation 
these provisions are typically expected to be utilised over the 12 to 24 months 
c property
property provisions relate to dilapidations and similar property costs and costs associated with onerous property contracts  
all such provisions are assessed by reference to the terms and conditions of the contract and market conditions at the 
balance sheet date property provisions are expected to be utilised over the next nine years
d contract and other
contract and other provisions relate to onerous contracts and contracts with unfavourable terms arising on the acquisition  
of businesses and anticipated costs of unresolved legal disputes all such provisions are assessed by reference to the  
best available information at the balance sheet date contract and other provisions are expected to be utilised over 
the next 24 months overview performance review governance financial statements other information
81
talktalk telecom group plc  annual report 2011
21 share capital
2011 
million
2010
million
2011 
£m
2010 
£m
allotted calledup and fully paid
ordinary shares of 01 pence each 914 914 1 1
in addition redeemable preference shares of £50000 were issued as part of the demerger transaction and were redeemed in 
the year 
22 reserves 
share capital share premium
translation 
reserve
demerger 
reserve
retained 
earnings and 
other reserves total
£m
 
£m
 
£m
 
£m
 
£m
 
£m
at 1 april 2010 1 586 60 513 378 392
net profit for the year – – – – 35 35
exchange differences on translation of foreign operations – – – – 1 1
recycling of translation reserve – – 4 – – 4
currency translation and cash flow hedges – – 1 – – 1
tax on items recognised directly in reserves note 7 – – – – 2 2
settlement of group esot shares – – – – 1 1
sharebased payments reserve credit note 5 – – – – 4 4
equity dividends – – – – 15 15
at 31 march 2011 1 586 65 513 406 415
share capital share premium
translation 
reserve
demerger 
reserve
retained 
earnings and 
other reserves total
£m
 
£m
 
£m
 
£m
 
£m
 
£m
at 1 april 2009 – – 59 529 232 702
net loss for the year – – – – 3 3
currency translation and cash flow hedges – – 1 – – 1
tax on items recognised directly in reserves note 7 – – – – 1 1
issue of share capital 1 986 – 987 – –
capital reduction – 400 – – 400 –
sharebased payments reserve credit note 5 – – – – 4 4
sharebased payments reserve debit note 5 – – – – 3 3
equity dividends – – – – 251 251
movement in demerger reserves – – – 55 – 55
at 31 march 2010 1 586 60 513 378 392
as explained in note 1 the demerger reserve primarily reflects the profits or losses arising on the transfer of investments  
and net assets of cpw on demerger 
the ultimate parent company of the group talktalk telecom group plc was incorporated on 15 december 2009  
as discussed in note 1 talktalk telecom group plc became the ultimate parent company of the group during the prior  
year and these financial statements have been prepared as if this structure had been in place throughout the prior year
on 29 march 2010 the group became a separately listed entity on the london stock exchange under a court approved scheme 
of arrangement under part 26 of the companies act under this scheme the former parent company of the group cpw was 
delisted and a new parent company incorporated holding a and b shares in cpw this new parent company talktalk telecom 
group plc paid a dividend of £182m to carphone warehouse group plc as part of the scheme of arrangement representing 
the book value of the businesses that formed carphone warehouse group plc 82
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
22 reserves continued
both the share capital and share premium in the new company arose as a result of the issuance of new shares in the group  
to ordinary shareholders of cpw as these shares were issued for nil consideration both the share capital of £1m and share 
premium of £986m have been treated as arising from the demerger reserve 
on 29 march 2010 the share premium relating to the ordinary shares was reduced by £400m by way of a courtapproved 
capital reduction this had the effect of creating distributable reserves which may be released at the discretion and upon 
the resolution of the board
the £55m movement in the demerger reserve during the year ended 31 march 2010 arose as a result of the restructuring 
of cpw as explained in the prospectus such movements have principally arisen from the allocation of operating expenses 
and profits arising in companies that form part of the talktalk group after the demerger that related to the business of 
carphone warehouse group plc including the impact in 2009 of the best buy europe joint venture transaction and 
dividends within cpw
during the year ended 31 march 2010 equity dividends of £251m were paid of this total £27m represented the ordinary final 
dividend of cpw for the financial year ended 31 march 2009 £13m represented the ordinary interim dividend of cpw for 
the financial year ended 31 march 2010 and £29m represented a special interim dividend paid by cpw to its shareholders 
prior to demerger the demerger dividend of £182m was paid by cpw to carphone warehouse group plc as part of the 
demerger transaction and represented the book value of assets transferred to carphone warehouse group plc from cpw
net purchase of own shares
the talktalk telecom holdings esot held 5 million shares at 31 march 2011 2010  10 million in the company for the benefit 
of cpw former employees the group esot has waived its rights to receive dividends and none of its shares have been 
allocated to specific schemes at the year end the shares had a market value of £7m 2010  £13m
23 analysis of changes in net debt
opening net cash flow
exchange 
movements closing
 
£m £m
 
£m £m
2011
cash and cash equivalents 1 – – 1
bank overdrafts 9 – – 9
8 – – 8
current loans and other borrowings 10 25 – 35
noncurrent loans and other borrowings 490 97 2 395
500 72 2 430
total net debt 508 72 2 438
loans to related parties 3 1 – 2
total net debt including loans to related parties 505 71 2 436 overview performance review governance financial statements other information
83
talktalk telecom group plc  annual report 2011
opening net cash flow
exchange 
movements closing
 
£m £m
 
£m £m
2010
cash and cash equivalents 6 5 – 1
bank overdrafts 33 24 – 9
27 19 – 8
current loans and other borrowings – 10 – 10
noncurrent loans and other borrowings 425 65 – 490
425 75 – 500
total net debt 452 56 – 508
loans to related parties 397 394 – 3
total net debt including loans to related parties 55 450 – 505
during the prior year the group repaid funding of £425m and drew down £500m on new facilities
24 commitments under operating leases
the group leases network infrastructure and offices under noncancellable operating leases the leases have varying terms 
purchase options escalation clauses and renewal rights there were no leases which were individually significant to the group 
the group had outstanding commitments for future minimum payments due as follows
2011 
£m
2010 
£m
less than 1 year 38 34
2 to 5 years 83 95
greater than 5 years 56 48
177 177
25 capital commitments
the group had entered into the following amount of contractual commitments for the acquisition of property plant and equipment 
at the year end
2011 
£m
2010 
£m
expenditure contracted but not provided for in the financial statements 14 29
26 pension arrangements
the group provides various defined contribution pension schemes for the benefit of a significant number of its employees 
the cost of which for the year ended 31 march 2011 was £3m 2010  £3m 84
talktalk telecom group plc  annual report 2011
notes to the consolidated financial statements
continued
27 contingent liabilities
as at the 31 march 2011 the group is awaiting a decision from ofcom as to what if any action it will take as result of its 
investigation of the group in respect of general condition 11 concerning certain bills the group has issued to customers after  
they ceased to receive service from the group no provision has been made in these financial statements as at it is uncertain  
both as to whether or not ofcom will impose any financial penalty and the amount of such penalty
28 related party transactions
during the year the group had the following disclosable transactions
best buy europe
carphone 
warehouse 
group plc
other related 
parties
£m £m £m
2011
loans owed to the group
– – 2
2010
revenue for services provided 15 – –
expenses for services received 24 2 –
net interest income – 5 –
loans owed to the group – – 3
other amounts owed to the group 8 – –
amounts owed by the group 18 1 –
following the demerger of the group from cpw and the adoption of ias 24 revised best buy europe and carphone warehouse 
group plc are no longer considered related parties see note 1
other related parties comprises loans to future office communications limited 2010  opal 2cch limited and ecocall 
limited associated undertakings of the group
revenue for services provided during the prior year principally relates to telecommunication services expenses for services 
received relate primarily to it services and commissions on product sales all products and services were provided at market rates 
the remuneration of the directors who are key management personnel of the group is set out in the directors’ remuneration 
report on pages 32 to 38 overview performance review governance financial statements other information
85
talktalk telecom group plc  annual report 2011
29 restatement of comparative information
during the year the following adjustments were agreed in respect of acquisitions
•  a net adjustment in respect of working capital and customer numbers was agreed between the group and tiscali spa for the 
acquisition of tiscali uk this resulted in an adjustment to goodwill of £14m the carrying value of goodwill of tiscali uk in 
the prior year has been restated to £162m in line with the requirements of ias 1 ‘presentation of financial statements’ 
•  the deferred consideration on uk telco limited was finalised and settled this has resulted in an adjustment to goodwill  
of £1m the carrying value of goodwill of uk telco in the prior year has been restated to £4m in line with the requirements 
of ias 1 ‘presentation of financial statements’
the comparative information has been restated to reflect the impact of this settlement this only impacted the balance sheet  
a restated balance sheet for the year ended 31 march 2009 has not been presented as the above restatement did not impact 
that year 
balance sheet at 31 march 2010
as previously 
reported
restatement of 
tiscali goodwill
restatement of 
uk telco 
deferred 
consideration as restated
£m £m £m £m
noncurrent assets
goodwill 485 14 1 470
other intangible assets 316 – – 316
property plant and equipment 262 – – 262
noncurrent asset investments 1 – – 1
deferred tax assets 155 – – 155
1219 14 1 1204
current assets
cash and cash equivalents 1 – – 1
inventories 2 – – 2
trade and other receivables 166 14 – 180
loans to related parties 3 – – 3
172 14 – 186
total assets 1391 – 1 1390
current liabilities
trade and other payables 401 – 1 400
corporation tax liabilities 42 – – 42
loans and other borrowings 19 – – 19
provisions 29 – – 29
491 – 1 490
noncurrent liabilities 
loans and other borrowings 490 – – 490
provisions 18 – – 18
508 – – 508
total liabilities 999 – 1 998
net assets 392 – – 392
equity
share capital 1 – – 1
share premium 586 – – 586
translation reserve 60 – – 60
demerger reserve 513 – – 513
retained earnings and other reserves 378 – – 378
funds attributable to equity shareholders 392 – – 392 86
talktalk telecom group plc  annual report 2011
independent auditor’s report to the directors 
of talktalk telecom group plc
we have audited the parent company financial statements 
of talktalk telecom group plc for the period ended 
31 march 2011 which comprise the company balance sheet 
the company reconciliation of movements in shareholders’ 
funds and the related notes 1 to 9 the financial reporting 
framework that has been applied in their preparation is 
applicable law and united kingdom accounting standards 
united kingdom generally accepted accounting practice
this report is made solely to the company’s members  
as a body in accordance with chapter 3 of part 16 of the 
companies act 2006 our audit work has been undertaken so 
that we might state to the company’s members those matters 
we are required to state to them in an auditor’s report and for 
no other purpose to the fullest extent permitted by law we do 
not accept or assume responsibility to anyone other than the 
company and the company’s members as a body for our 
audit work for this report or for the opinions we have formed
respective responsibilities of directors and auditor
as explained more fully in the directors’ responsibilities 
statement the directors are responsible for the preparation 
of the parent company financial statements and for being 
satisfied that they give a true and fair view our responsibility 
is to audit and express an opinion on the parent company 
financial statements in accordance with applicable law and 
international standards on auditing uk and ireland those 
standards require us to comply with the auditing practices 
board’s ethical standards for auditors
scope of the audit of the financial statements
an audit involves obtaining evidence about the amounts and 
disclosures in the financial statements sufficient to give 
reasonable assurance that the financial statements are free 
from material misstatement whether caused by fraud or error 
this includes an assessment of whether the accounting policies 
are appropriate to the parent company’s circumstances and 
have been consistently applied and adequately disclosed 
the reasonableness of significant accounting estimates made 
by the directors and the overall presentation of the financial 
statements in addition we read all the financial and nonfinancial 
information in the annual report to identify material inconsistencies 
with the audited financial statements if we become aware of 
any apparent material misstatements or inconsistencies we 
consider the implications for our report
opinion on financial statements
in our opinion the parent company financial statements
•  give a true and fair view of the state of the company’s 
affairs as at 31 march 2011
•  have been properly prepared in accordance with united 
kingdom generally accepted accounting practice and
•  have been prepared in accordance with the requirements 
of the companies act 2006
opinion on other matters prescribed by the companies act 2006
in our opinion
•  the part of the directors’ remuneration report to be 
audited has been properly prepared in accordance  
with the companies act 2006 and
•  the information given in the directors’ report for the 
financial year for which the financial statements are 
prepared is consistent with the parent company 
financial statements
matters on which we are required to report by exception
we have nothing to report in respect of the following matters 
where the companies act 2006 requires us to report to you 
if in our opinion
•  adequate accounting records have not been kept by the 
parent company or returns adequate for our audit have  
not been received from branches not visited by us or
•  the parent company financial statements and the part of 
the directors’ remuneration report to be audited are not 
in agreement with the accounting records and returns or
•  certain disclosures of directors’ remuneration specified  
by law are not made or
•  we have not received all the information and explanations 
we require for our audit
other matters
we have reported separately on the group financial statements 
of talktalk telecom group plc for the year
john murphy senior statutory auditor 
for and on behalf of deloitte llp 
chartered accountants and statutory auditor  
london united kingdom 
18 may 2011 overview performance review governance financial statements other information
87
talktalk telecom group plc  annual report 2011
company balance sheet
 
as at 31 march 2011
notes
2011
£m
fixed assets
noncurrent asset investments 4 996
996
current assets
debtors amounts due within one year 5 487
487
total assets 1483
current liabilities
creditors amounts due within one year 6 122
122
noncurrent liabilities 
loans 7 395
395
total liabilities 517
net assets 966
equity
share capital 8 9 1
share premium 9 586
retained earnings and other reserves 9 379
equity shareholders’ funds 966
the accompanying notes are an integral part of this company balance sheet
these financial statements were approved by the board on 18 may 2011 they were signed on its behalf by
d harding      a stirling  
chief executive officer     chief financial officer 
18 may 2011      18 may 2011 88
talktalk telecom group plc  annual report 2011
company reconciliation of movement in shareholders’ funds
2011
£m
loss for the period 10
equity dividends 15
retained loss for the period 25
issue of share capital 987
net cost of sharebased payment 4
net movement of shareholders’ funds 966
opening shareholders’ funds –
closing shareholders’ funds 966
  overview performance review governance financial statements other information
89
talktalk telecom group plc  annual report 2011
notes to the company financial statements
1 accounting policies
basis of preparation
the separate financial statements of the company are presented as required by the companies act 2006 they have been 
prepared under the historical cost convention and in accordance with applicable united kingdom accounting standards and 
law the company was incorporated on 15 december 2009 this is the first set of statutory accounts that have been prepared 
accordingly these have been prepared for the period from 15 december 2009 to 31 march 2011
the financial statements have been prepared on the going concern basis details of the considerations undertaken by the 
directors in reaching this conclusion are set out on page 19 within the finance review
the principal accounting policies are summarised below they have all been applied consistently throughout the period 
investments
fixed asset investments in subsidiaries and joint ventures are recorded at cost being the fair value of consideration acquisition 
charges associated with the investment and capital contributions by way of sharebased payments less any provision for impairment 
financial liabilities and equity instruments
financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered 
into an equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all  
of its liabilities the accounting policies adopted for specific financial liabilities and equity instruments are set out below
loans and other borrowings 
loans and other borrowings represent committed and uncommitted bank loans and bank overdrafts 
these are initially measured at fair value which is equal to cost at inception and are subsequently measured at amortised cost 
using the effective interest rate method except where they are identified as a hedged item in a fair value hedge any difference 
between the proceeds net of transaction costs and the settlement or redemption of borrowings is recognised over the term of 
the borrowing
bank fees and legal costs associated with the securing of external financing are capitalised and amortised over the term of 
the relevant facility all other borrowing costs are recognised in the income statement in the period in which they are incurred
equity instruments
equity instruments issued by the company are recorded at the proceeds received net of direct issuance costs 
sharebased payments
the company issues equity settled sharebased payments to certain employees equity settled sharebased payments are 
measured at fair value at the date of grant and expensed over the vesting period based on an estimate of the number of 
shares that will eventually vest
fair value is measured by use of a binomial model for sharebased payments with internal performance criteria such as eps 
targets and a monte carlo model for those with external performance criteria such as tsr targets
for schemes with nonmarket performance criteria the number of options expected to vest is recalculated at each balance 
sheet date based on expectations of performance against target and of leavers prior to vesting the movement in cumulative 
expense since the previous balance sheet date is recognised in the income statement with a corresponding entry in reserves
for schemes with market performance criteria the number of options expected to vest is adjusted only for expectations of 
leavers prior to vesting the movement in cumulative expense since the previous balance sheet date is recognised in the 
income statement with a corresponding entry in reserves
sharebased payments issued by the company to its subsidiary undertakings are treated as additions to investments based on 
the fair value of the grant spread over the relevant vesting period with corresponding credit to reserves where the company 
recharges the cost of sharebased payments to its subsidiary undertaking the investment is reduced accordingly 
taxation
current tax is provided at amounts expected to be paid or recovered using the tax rates and laws that have been enacted or 
substantively enacted at the balance sheet date
deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date 
where transactions or events that result in an obligation to pay more or a right to pay less tax in the future have occurred at 
the balance sheet date with the following exception 90
talktalk telecom group plc  annual report 2011
notes to the company financial statements
continued
1 accounting policies continued
deferred tax assets are recognised only to the extent that the directors consider that it is more likely than not that there will be 
suitable taxable profits from which the future reversal of the underlying timing differences can be deducted
deferred tax is measured on a nondiscounted basis with the tax rates that are expected to apply in the periods in which the 
timing differences reverse based on tax rates and laws enacted or substantively enacted at the balance sheet date
the taxation liabilities of certain group companies are reduced wholly or in part by the surrender of losses by fellow group companies 
dividends 
dividends receivable from the company’s subsidiaries and joint venture investments are recognised only when they are approved 
by shareholders
final dividend distributions to the company’s shareholders are recognised as a liability in the financial statements in the period in 
which they are approved by the company’s shareholders interim dividends are recognised in the period in which they are paid 
directors
the directors’ remuneration was borne by another group company and not recharged
detailed disclosures of the directors’ remuneration and share based payments are given in the audited section of the directors’ 
remuneration report on pages 32 to 38 and should be regarded as an integral part of this note 
employees
the company has no employees
exemptions
the company has taken advantage of the exemption under frs 8 ‘related party disclosures’ not to provide details of related 
party transactions with other group companies as the company financial statements are presented together with the 
consolidated group financial statements 
the company has applied the exemption under frs 29 ‘financial instruments disclosures’ so as not to disclose details of 
financial instruments held by the company full disclosure of the group’s financial instruments recognised under frs 29 
ifrs 7 ‘financial instruments disclosures’ and ias 39 ‘financial instruments recognition and measurement’ is provided 
in note 19 to the group’s annual report and accounts
2 loss for the period
as permitted by section 408 of the companies act 2006 the company has elected not to present its own profit and loss account 
for the period the company reported a loss of £10m for the period ended 31 march 2011
the auditor’s remuneration for audit and other services is disclosed in the corporate governance report on page 29 
3 dividends
2011
£m
interim dividend for the period ended 31 march 2011 of 170p per ordinary share 15
total ordinary dividends 15
final dividend for period ended 31 march 2011 of 390p per ordinary share 35
the final dividend for the period ended 31 march 2011 was approved by the board on 18 may 2011 and has not been included 
as a liability as at 31 march 2011
the expected cost of this dividend reflects the fact that the group esot has agreed to waive its rights to receive dividends overview performance review governance financial statements other information
91
talktalk telecom group plc  annual report 2011
4 noncurrent asset investments
2011
£m
subsidiaries 991
joint venture 5
996
2011
£m
cost and net book value
opening balance at 15 december 2009 –
additions 996
at 31 march 2011 996
on 26 march 2010 the company became the owner of the entire issued share capital of cpw that owns the entire issued 
share capital of talktalk group limited the holding company of the group’s fixed line telecommunications companies in the uk 
the investment was received by the company as consideration for shares issued to the former shareholders of cpw as part 
of the demerger transaction
joint venture
on 10 september 2010 the group entered into a joint venture agreement with the british broadcasting corporation itv 
broadcasting limited british telecom plc channel four television corporation arqiva limited and channel 5 broadcasting 
limited to form youview tv limited formerly canvas pro tem limited the joint venture has been established in order to 
develop a new freetoair internetconnected tv service to uk homes in 2012 further detail relating to the joint venture 
are disclosed within note 14 to the consolidated financial statements
principal group investments
the company has investments in the following subsidiary undertakings to avoid a statement of excessive length details of 
investments which are not significant have been omitted all holdings are in equity share capital
name
country of incorporation  
or registration percentage ownership nature of business
talktalk telecom holdings limited england and wales 100 holding company
talktalk group limited england and wales 100 holding company
onetel telecommunications limited england and wales 100 telecommunications
talktalk communications limited 
formerly opal telecom limited england and wales 100 telecommunications
talktalk telecom limited england and wales 100 telecommunications
talktalk direct limited england and wales 100 telecommunications
talktalk uk communication services limited england and wales 100 telecommunications
gis telecoms limited england and wales 100 telecommunications
cpw network services limited england and wales 100 telecommunications
tiscali uk limited england and wales 100 telecommunications
 directly held 92
talktalk telecom group plc  annual report 2011
notes to the company financial statements
continued
5 debtors amounts due within one year
2011
£m
amounts owed by group undertakings 485
other debtors 2
487
interest on intercompany funding is calculated at the bank of england base rate plus 375 intercompany deposits receive interest 
at the bank of england base rate with no margin interest is either paid or capitalised monthly as appropriate where they exist 
currency balances are calculated at similar rates
interest is not charged on balances arising between group companies as a result of intercompany trading such balances are 
settled regularly in line with agreed terms of trade usually through the group’s netting system within 30 to 60 days
6 creditors amounts due within one year
2011
£m
amounts owed to group undertakings 122
122
interest on intercompany funding is calculated at the bank of england base rate plus 375 intercompany deposits receive interest 
at the bank of england base rate with no margin interest is either paid or capitalised monthly as appropriate where they exist 
currency balances are calculated at similar rates
interest is not charged on balances arising between group companies as a result of intercompany trading such balances are 
settled regularly in line with agreed terms of trade usually through the group’s netting system within 30 to 60 days
7 loans
2011
£m
loans 395
395
the details of the loans are disclosed within note 18 to the consolidated financial statements and should be regarded as an 
integral part of these financial statements overview performance review governance financial statements other information
93
talktalk telecom group plc  annual report 2011
8 share capital
2011
million
2011
£m
calledup allotted and fully paid
ordinary shares of 01 pence each 914 1
9 reserves
share capital share premium
profit and loss 
and other 
reserves total
£m £m £m £m
opening balance at 15 december 2009 – – – –
issue of share capital 1 986 – 987
capital reduction – 400 400 –
loss for the period – – 10 10
net cost of sharebased payments – – 4 4
equity dividends 15 15
1 586 379 966
the company was incorporated on 15 december 2009 and on 29 march 2010 the group became a separately listed entity  
on the london stock exchange under a court approved scheme of arrangement under part 26 of the companies act both  
the share capital and share premium in the company arose as a result of the issuance of new shares in the group to ordinary 
shareholders of cpw as these shares were issued for nil consideration both the share capital of £1m and share premium  
of £986m have been treated as arising from the demerger reserve further detail is included in notes 1 and 22 to the 
consolidated financial statements which should be considered an integral part of these financial statements 
on 29 march 2010 the share premium relating to the ordinary shares was reduced by £400m by way of a court approved 
capital reduction this had the effect of creating distributable reserves which are available at the discretion of the board 
for dividend payments as required  94 overview performance review governance financial statements other information
95
other information
five year record unaudited 96
glossary 97
shareholder information 98 96
talktalk telecom group plc  annual report 2011
five year record unaudited
2011 
£m
2010  
as restated 
£m
2009 
unaudited
£m
2008 
unaudited 
£m
2007 
unaudited 
£m
headline results
revenue 1765 1686 1385 1424 1116
net profit for the year 122 106 95 12 12
net assets employed
noncurrent assets 1137 1204 1319 928 857
net current assets liabilities before provisions 281 275 184 235 122
provisions 46 47 8 10 18
noncurrent liabilities 395 490 425 895 862
net assets employed 415 392 702 212 145
headline earnings per share
basic 135 118 107 13 14
diluted 128 112 104 13 13
 the balance sheet at 31 march 2011 has been restated to reflect the finalisation of the tiscali uk and uk telco acquisition purchase price note 29
on 26 march 2010 cpw demerged into carphone warehouse group plc and the group the company and carphone warehouse 
group plc were separately listed on the london stock exchange 
the consolidated financial information of the group for the years ended 31 march 2010 31 march 2009 31 march 2008  
and 31 march 2007 have been prepared with the objective of presenting the results net assets and cash flows of the group  
in the form that arose on completion of the demerger as if it had been a standalone business during those periods overview performance review governance financial statements other information
97
talktalk telecom group plc  annual report 2011
glossary
adsl asymmetric digital subscriber line technology enables data transmission over existing copper wiring at data rates several 
hundred times faster than analog modems providing for simultaneous delivery of voice video and data
arpu average revenue per user
best buy europe joint venture between carphone warehouse group plc and best buy co inc
cagr compound annual growth rate
cgu cash generating unit
churn a measure of the number of subscribers moving into or out of a product or service over a specific period of time
the company talktalk telecom group plc
cps carrier preselect is the automated process under which voice customers can be switched from bt and other suppliers  
with no requirement to change telephone numbers or to dial prefixes or to install dialler boxes
cpw the carphone warehouse group plc its subsidiary companies joint ventures and investments
crm customer relationship management
demerger the demerger of the the carphone warehouse group plc into talktalk telecom group plc and carphone warehouse 
group plc effective on 26 march 2010
dwdm dense wave division multiplexing
ebit earnings before interest and taxation
ebitda earnings before interest taxation depreciation and amortisation
eps earnings per share
ethernet ethernet is a protocol that controls data transmission over a communications network often referred to as a family  
of framebased computer
free cash flow cash generated from operations before exceptional items interest taxation dividend payments and investments
gb gigabytes per second
gps global positioning system
group esot talktalk telecoms holdings employee share option trust
headline information headline information represents the group’s consolidated income statement stated before the amortisation of acquisition 
intangibles and exceptional items that are considered to be oneoff nonrecurring in nature and so material that the directors 
believe that they require separate disclosure to avoid distortion of underlying performance and should be separately presented 
on the face of the income statement
hd high definition
ip internet protocol is the packet data protocol used for routing and carriage of messages across the internet and similar networks 
ip performs the addressing function and contains some control information to allow packets to be routed through networks
isp internet service provider
llu local loop unbundling
mbitsmbps unit of data transfer rate equal to 1000000 bits per second
mpf metallic path facility provides both broadband and telephony services to customers from talktalk group exchange infrastructure
mvno mobile virtual network operator
narrowband telecommunication service that carries voice information in a narrowband of frequencies
net debt borrowings net of cash held on deposit at financial institutions
ngn next generation network
quad play a customer that takes voice broadband tv and mvno services from the group
rcf revolving credit facility
smpf or partial unbundling shared metallic path facility provides broadband services to customers from talktalk group exchange infrastructure
sme small and medium sized enterprises
tdm time division multiplexing and a digital data transmission method that takes signals from multiple sources divides them into 
pieces which are then placed periodically into time slots transmits them down a single path and reassembles the time slots 
back into multiple signals at the remote end of the transmission
unbundling process by which bt makes available its local network to third party broadband service providers
voip voice over internet protocol
wifi trademark of the wifi alliance often used as a general term for wireless networking technology that uses radio waves  
to provide wireless high speed internet and network connections shareholder information
98
talktalk telecom group plc  annual report 2011
financial calendar
agm 28 july 2011
exdividend date 25 may 2011
record date 27 may 2011
dividend payment date 5 august 2011
our website
visit wwwtalktalkgroupcominvestors 
to find out more information on 
our latest financial results reports 
share price financial calendar 
and shareholder services overview performance review governance financial statements other information
talktalk telecom group plc  annual report 2011
99
notes cert no xxxxxxxxxx
for more information visit
wwwtalktalkgroupcom
about this report
this report was printed in the uk by royle print a carbonneutral printing 
company the report was produced using vegetable based inks on one 
production site avoiding the need for transportation between processes
the paper used in this report is amadeus 100 silk for the cover and amadeus 
75 matt for the text the cover board comprises 100 postconsumer waste 
and the text 50 postconsumer waste and 25 preconsumer waste both 
are independently certified according to the rules of the forest stewardship 
council please remove the cover before recycling 
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talktalk telecom group plc
registered in england and wales no 7105891 
11 evesham street london w11 4ar
100
talktalk telecom group plc  annual report 2011 for more information visit 
wwwtalktalkgroupcom
talktalk telecom group plc
we are one of the leading fixed line  
voice and broadband telecommunications 
businesses in the uk we have over  
48 million customers
demerger from carphone warehouse
in march 2010 we demerged from the carphone  
warehouse group plc and listed on the london 
stock exchange as talktalk telecom group plc 
and are now a constituent of the ftse 250
directors’ report overview 01
financial highlights 01
what we do 04
chairman’s statement 06
chief executive officer’s statement 07
market overview 10
 
directors’ report performance review 12
business review 14
finance review 16
principal risks and uncertainties 20
corporate and social responsibility review 22
 
directors’ report governance 24
board and advisors 26
corporate governance 28
directors’ remuneration report 32
other statutory information 39
 
financial statements 40
statement of directors’ responsibilities 42
independent auditor’s report to the members  
of talktalk telecom group plc 43
consolidated income statement 44
consolidated statement of comprehensive income 45
consolidated statement of changes in equity 46
consolidated balance sheet 47
consolidated cash flow statement 48
notes to the consolidated financial statements 49
independent auditor’s report to the directors  
of talktalk telecom group plc 86
company balance sheet 87
company reconciliation of movement  
in shareholders’ funds 88
notes to the company financial statements 89
 
other information 94
five year record unaudited 96
glossary 97
shareholder information 98 talktalk telecom group plc
annual report 2011
wwwtalktalkgroupcom
talktalk telecom group plc annual report 2011


Summary:
 overview performance review governance financial statements other information
revenue
47

2011
2010
£m
1765
1686
operating free cash flow
31

2011
2010
£m
119
156
headline earnings per share
24

2011
2010
pence
109
135
dividends per share
56
final
interim
pence
17
39
 
headline ebitda
25

2011
2010
£m
221
276
statutory profit before tax
100

2011
2010
£m
11
57
 
01
talktalk telecom group plc  annual report 2011
financial highlights
•	 we have had strong ebitda 
earnings and cash flow 
growth during a year of 
major change across 
the business
•	 we achieved our integration 
synergies run rate of £55m 
making good progress 
towards implementing 
our strategy
		 we	 use	 adjusted	 measures	 where	 measures	 are	 not	 defined	 under	 ifrs	 or	 ifrs	 numbers	 have	 been	 adjusted	
for	 details	 see	 page	 97 02 overview performance review governance financial statements other information
03
directors’ report
overview
what	we	do	 04
chairman’s	statement	 06
chief	executive	officer’s	statement	 07
market	overview	 10