Talk Talk lifted by broker upgrade and takeover speculation

Telecoms group Talk Talk is one of the day's big gainers, up more than 1% on renewed takeover speculation. In a note upgrading its recommendation from neutral to buy, Goldman Sachs said the company's results would be boosted by cost cutting, but it also picked the company as a possible bid target. The bank said: TalkTalk is starting a three-year self-help cycle that we estimate will add 35% to current earnings; in addition, we see the company as an attractive strategic asset with M&A potential. The margin growth and M&A opportunity is not reflected in consensus or valuations, in our view. As for possible predators, the bank said: TalkTalk could be an attractive M&A candidate for a UK fixed-line player seeking scale (to facilitate profitable fibre rollout) or a mobile operator that believes in the cross-selling opportunities of fixed-mobile convergence. The upgrade, and the bid talk, has lifted the company's shares 1.9p to 147.6p in a falling market. They were also buoyed by news that non-executive director Ian West last week bought 181,700 shares at 137.58p each.