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Data breach will cost TalkTalk £35m

TalkTalk CEO Dido Harding expects to lose between £30m and £35m as a result of its recent breach

The costs of the TalkTalk data breach could reach between £30m and £35m, the firm's chief executive, Dido Harding, has revealed.

Speaking to the BBC, she said the one-off costs, which have not yet hit the books, will cover the initial response, the cost of calls into its call centres, additional IT costs, and lost revenues.

In the wake of the hack, which came to light on 21 October 2015, it was initially thought that millions of TalkTalk’s customers could be affected.

However, an investigation has since revealed that only 157,000 people had their details compromised. Four people have since been arrested over the attack.

TalkTalk has suffered three data breaches in the past 12 months, although when questioned on this Harding disputed that these breaches had necessarily been directly TalkTalk’s fault. The first occurred at a supplier, and the second at the company’s former owner, Carphone Warehouse, with which it still shares a number of back-end systems despite having split five years ago.

Nevertheless, Harding acknowledged the concerns of TalkTalk customers and will offer them a free upgrade, and said those who were financially affected by the breach will be allowed to exit their contracts without incurring a financial penalty.

“We are taking significant further steps to ensure our systems are protected, as well as writing to all our customers outlining what we are doing to keep their data safe,” she said.

No exit

However, Harding said TalkTalk would not allow customers who were not affected to get out of their contracts so easily.

She said the company had seen a number of customers cancelling their direct debits with the internet service provider (ISP), but many of those had since been reinstated.

“Customers think we are doing the right thing,” Harding insisted.

Strong growth

The data breach came too late to impact TalkTalk’s latest set of financial results, which were released today (11 November 2015).

In a statement released to the City, TalkTalk said its first-half revenues were up by 4.7% to £912m, although earnings before interest, taxes, depreciation and amortisation (Ebitda) dropped from £110m this time in 2014 to £90m. Average revenue per user grew by 6.1% to £28.08.

The company added 176,000 "revenue generating units" during the period and continued to grow its quad-play and fibre penetration in its existing customer base.

TalkTalk Business revenues accounted for more than 30% of group sales during the period, driven by strong demand for data connectivity and strengthened by its relationship with existing customers such as the Post Office.

Managing director Charles Bligh said it would look to continue to expand capacity on its network to reflect the massive capacity demands businesses were starting to make. However, he did not comment on TalkTalk’s wider woes.

Computer Weekly had previously asked TalkTalk Business if any of its customers were affected in the data breach, but the firm chose not to respond.

Read more on Telecoms networks and broadband communications

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It's doubtful that forcing unhappy customers to honor their existing contracts will engender much good for TalkTalk. Nor will their "Let's move along, nothing to see here" approach do more than provide short term humor. It's time for companies to get ahead of the problem instead of constantly patch the holes left behind. The WhackaMole approach doesn't work. That stolen £35M could have bought a lot of improvements and updates if it had been spent on better solutions.
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