By Paul Sandle

By Paul Sandle

LONDON (Reuters) - TalkTalk founder and chairman Charles Dunstone will take over the running of the British telecoms operator when chief executive Dido Harding steps down in May after seven years in charge, the company said on Wednesday.

Harding's departure came as TalkTalk reported a 5 percent drop in revenue and said it had lost a net 42,000 broadband subscribers in its third quarter, but kept its full-year earnings forecast unchanged.

Shares in TalkTalk, which competes with Sky, Virgin Media and industry leader BT, were trading up 8.5 percent at 170 pence at 1231 GMT.


Dogged for years by a reputation for poor customer service, largely as a result of merging several companies, TalkTalk's shares had fallen 23 percent in the last 12 months after a high-profile cyber attack in October 2015.

"I've always been a firm believer that CEOs should not overstay their welcome," Harding, who will be replaced by company insider Tristia Harrison, said.

Dunstone, who created TalkTalk in 2003 as an offshoot of his Carphone Warehouse group, will take on executive duties following the exit of Harding, who he appointed when he separately listed the telecoms firm in 2010.

Analysts at Jefferies said Dunstone's move raised hopes TalkTalk would focus on regaining its "value" credentials.

Dunstone, a 52-year-old sailing enthusiast who owns a 31 percent stake in TalkTalk worth about 500 million pounds, said he would support the new management team by taking an executive role as well as chairing the board.

Doing both jobs is not considered corporate best practice.

"There are very, very strong successors within the business, but they don't have the experience of running a public company and the investors relations and all that kind of stuff, so I said I'll become executive chairman and support them in that role," Dunstone said in an interview.

He will step down as chairman of Dixons Carphone and be replaced by former BT chief executive Ian Livingston.


Harding, who has been a consistent thorn in the side of BT, said she would focus on public service, including her role in the upper house of the British parliament.

The 49-year-old, a member of the Jockey Club whose horse Cool Dawn won the Cheltenham Gold Cup in 1998, was a contemporary of former prime minister David Cameron at Oxford University, and sits on the Conservative benches in the Lords.

She was "incredibly proud" of improvements delivered to TalkTalk's clients, although there was "still work to do".

A low point was the cyber attack, which put the data of 157,000 customers at risk and cost around 60 million pounds, including a 400,000 pound fine for security failings.

Harding went on television to warn 4 million customers about the breach, a strategy she said had improved trust in the brand.

TalkTalk relaunched its packages last year, aiming to offer simpler deals and re-establish a reputation for value.

The number of customers leaving had risen as a result of TalkTalk's new tariffs, while revenue was hit by re-pricing.

But net additions would return to growth in the fourth quarter and churn would come down markedly, Harding said.

Moving to fixed price plans had been vindicated by price hikes by BT and Sky, Dunstone said.

"We zig when the market zags. We just need to be true to our challenger values."

TalkTalk's group revenue fell 5 percent to 459 million pounds ($577 million) in the quarter, with revenue on its own network down 5.4 percent to 332 million pounds.

Earnings for the year are forecast to be towards the bottom of a 320 million to 360 million pound range.

(Editing by Kate Holton and Alexander Smith)

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