UPDATE 2-TalkTalk says FibreNation sale stalled after Labour broadband pledge

British broadband provider TalkTalk said on Friday that a deal to sell its FibreNation business had stalled after the opposition Labour Party announced a plan to create a "British Broadband" public service.

Labour said it plans to nationalize telecoms provider BT's fixed-line network if it wins Britain's December 12 election. The plan would also involve coming to agreements over access arrangements with TalkTalk and other broadband providers that have invested in fiber-to-the-premises, or possibly taking over those parts of the companies, Labour's finance chief John McDonnell said.

TalkTalk said it was still in discussions with interested parties regarding its FibreNation business. Its shares were down 3.5% by 0934 GMT. "Our discussions are very advanced, and yes, the news overnight, of course, is making everybody in the sector pause and consider," Chief Executive Tristia Harrison told Reuters.

"We were really close, really close, but I think something of this sort that is in the news, obviously everybody is... digesting and working out what it means." TalkTalk launched FibreNation last year with the aim of connecting 60,000 more homes in northern England with "fiber-to-the-premises" full gigabit speed connections.

The plan underlined its ambition to build its own ultrafast network reaching three million customers after it abandoned a plan to team up with M&G Prudential. Harrison said that the company had invested 60 million pounds in FibreNation, adding that it was a tiny part of the business.

She said the company had fielded an "awful lot of interest" in the business and was pleased with how the takeover process was going. Sky News reported that Goldman Sachs-backed CityFibre Holdings nearly signed a deal to acquire FibreNation on Thursday.

Labour's plan contrasts with the governing Conservative Party's vision for broadband. Prime Minister Boris Johnson has called for an "end the digital divide" through the rollout of full fiber broadband by 2025. Johnson's Conservatives have a healthy 10-point lead ahead of an election on Dec. 12, a poll by Savanta ComRes showed on Wednesday, extending their advantage over Labour.

Apart from the fiber service provided by FibreNation, TalkTalk depends on BT's Openreach network to provide its services. Openreach would be nationalized under Labour's plan, and Harrison said the industry was still contemplating the broader repercussions of the plan.

She spoke after TalkTalk reiterated its earnings outlook for the year, and said she was confident the company could continue to grow despite the uncertainties in Britain's political environment. "We feel we're in a strong place," she said.

Helped by accelerated customer growth in its hybrid fiber broadband and reduced costs, it reported a 14% increase in like-for-like earnings before interest, tax, depreciation and amortization (EBITDA).

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