Annual Financial Report

RNS Announcement

Wednesday 19 June 2013

For Immediate Release

TalkTalk Telecom Group PLC ("Company")

Publication of Annual Report 2013

The following documents have today been posted or otherwise made available to shareholders:

·; Annual Report 2013

·; Notice of 2013 Annual General Meeting

·; Form of Proxy for the 2013 Annual General Meeting

In accordance with Listing Rule 9.6.1 a copy of each of these documents has been uploaded to the National Storage Mechanism and will be available for viewing shortly at http://www.morningstar.co.uk/uk/NSM.

These documents are also available to view and download from the Company's website at http://www.talktalkgroup.com.

Copies of the Annual Report 2013 and Notice of the 2013 Annual General Meeting may also be obtained from:

The Company Secretary's Office

11 Evesham Street

London

W11 4AR

Compliance with the Disclosure and Transparency Rule 6.3.5 ('DTR 6.3.5') - Extracts from the Annual Report 2013

The information below, which is extracted from the Annual Report 2013, is included solely for the purpose of complying with DTR 6.3.5. It should be read in conjunction with the Company's Preliminary results announcement for the 12 months to 31 March 2013 issued on 16 May 2013 (available at http://www.talktalkgroup.com/press/press-releases/2013/16-05-2013.aspx). Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service. This material is not a substitute for reading the full Annual Report 2013. All page numbers and cross-references in the extracted information below refer to page numbers in the Annual Report 2013.

For further information please contact:

Tim Morris +44 (0) 208 753 8243

For media enquiries:

Alex Birtles +44 (0) 7515 034 676

Directors' Responsibilities

The Directors' responsibility statement below has been prepared in conjunction with the Annual Report 2013, whereas this dissemination document contains extracts from the Annual Report 2013 to comply with DTR 6.3.5.

Sir Charles Dunstone - Chairman

Dido Harding - Chief Executive Officer

Amy Stirling - Chief Financial Officer

David Goldie - Group Commercial Director

John Gildersleeve - Senior Independent Director

Ian West - Non-Executive Director

John Allwood - Non-Executive Director

Brent Hoberman - Non-Executive Director

Sir Howard Stringer - Non-Executive Director

James Powell - Non-Executive Director

We confirm to the best of our knowledge:

1. 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

2. The management 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.

Principle 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.

1. Competitive environment

Potential impact: Increased competition in the UK voice, broadband and TV market may impact financial performance.

Mitigation: We regularly monitor the product offerings of our key competitors as well as the latest market and consumer trends. This ensures we identify opportunities to strengthen our competitive position by broadening and enriching the products and services we offer and by finding ways to deliver greater benefits for our value-seeking customers. This financial year, TalkTalk successfully launched both a new TV and mobile handset proposition. These new product offerings will enable TalkTalk to differentiate ourselves from other triple and quad play providers in the marketplace.

2. Regulatory environment

Potential impact: Changes in regulation can significantly impact the Group's performance.

Mitigation: We actively participate in pricing consultations by Ofcom, including the use of independent experts to provide assistance and evidence as required. Current reviews are underway of the Wholesale Local Access Market Review, LLU Change Control and the Wholesale Broadband Access Market Review. There is close liaison with Ofcom to ensure that the Group's views on the future of regulation are well represented.

3. Regulatory compliance

Potential impact: Failure to operate effective processes and controls across the Group may have an adverse impact on the services we deliver to our customers, leading to churn, and non-compliance with regulatory requirements.

Mitigation: The Group's Regulatory Compliance Committee convenes at least quarterly to monitor the mitigation of operational risks which could give rise to customer complaints and regulatory breaches. This financial year, a new Consumer Quality & Compliance department has been established with responsibility for the independent monitoring of compliance for Consumer customers. The Director of Quality & Compliance chairs a weekly operational Compliance Committee meeting which is attended by senior executives.

4. Change management

Potential impact: We continue to review, rationalise and integrate our IT infrastructure and to simplify the way in which we operate our business. Disruption to our operations could have an adverse impact on the services we provide to our customers and on our financial performance.

Mitigation: The Executive Committee regularly monitors the progress of our significant change programmes and their associated risks. TalkTalk's Group Change Forum, comprised of senior executives, is responsible for establishing and monitoring adherence to the governance framework which determines how change is managed.

5. Data security

Potential impact: Failure to prevent the loss or exploitation of personally identifiable or commercially sensitive information could result in loss of competitive advantage, regulatory fines, damage to the brand and ultimately churn.

Mitigation: We continually review the Group's data security, investing in and implementing new solutions, both to prevent and detect security breaches, as they become available. In addition, the Data Governance Council, chaired by the Chief Technology Officer, meets fortnightly throughout the year to review data security risks and progress with their mitigation.

6. Network stability and reliability

Potential impact: Failure to provide a stable and reliable service may cause customer churn.

Mitigation: We have continued to invest heavily in our network to improve resilience and performance and to ensure we keep pace with customers' growing demands.

7. Key suppliers

Potential impact: The Group has a number of critical suppliers. Failure of any of these suppliers could significantly affect the Group's ability to continue operations and to maintain its financial performance.

Mitigation: We continue to review our processes and controls around supplier selection and in-life risk management. This helps to reduce the likelihood and potential impact of business interruption due to supplier failure.

8. Customer experience

Potential impact: Failure to deal with customer queries, resolve service faults and other issues in line with our customers' expectations could lead to complaints, damage to our brand and customer churn.

Mitigation: We are committed to continuously reviewing and improving the level of customer service we provide. In FY13 we have launched a number of initiatives to i) reduce the likelihood of customers experiencing service issues, ii) improve the ability of our customers to self-help via new online tools and iii) delivering better training and tools to our Customer Service teams so that queries and complaints can be handled more effectively.

9. Scaling TV

Potential impact: Having successfully launched a TV service with Youview, there is a risk that TalkTalk is unable to maximise competitive advantage through its failure to scale its network, operations and supply chain efficiently.

Mitigation: There are a number of areas of focus: i) Youview continues to invest in innovation and to roll-out its strategic product roadmap, ii) TalkTalk has recently launched a TV self-install proposition to support our TV rollout, iii) the Group continues to invest in the network and to plan for future capacity requirements, iv) TalkTalk continues to work closely with the major content providers to secure distribution rights for the most popular content, v) the Group and its strategic partners are focused on and have plans in place to continually improve the resilience of the supply chain.