UPDATE: Despite Phorm’s troubles, City analysts are still giving the company positive ratings. James Wheatcroft of Evolution Securities in a note today repeats an earlier “buy” rating based on its market trial in South Korea, and says Carphone’s decision to end its partnership agreement is “largely immaterial” as TalkTalk was merely a “follower” of BT (NYSE: BT) and had not conducted any of its own trials. BT’s decision to rule out deployment in the near future is going to cost Phorm dearly: Evolution reckons it could have made £2.3 million this year if BT had deployed Webwise. But nevertheless, it recommends Phorm as a good investment and predicts it will make £13.9 million in the UK in 2010—£21.6 million including Korea—and a massive £82.5 million in 2011.

Earlier: First BT went cold on Phorm, now Carphone Warehouse’s TalkTalk has “terminated its agreement”, says the behavioural ad company. Phorm is still in full-on face-saving mode, though, professing to be “very confident”: “The directors note that this relationship had not extended to any form of trial, in contrast to BT and some international ISPs.”

Phorm says it’s “extremely encouraged” that BT’s decision to rule out deployment any time soon was not inspired by privacy worries - but that will be the least of Phorm’s worries. The company’s shares were down to a low of £1.92 this morning from a 52-week high of £11.44—a reduction of 83.2 percent.

After making an operating loss of £30.8 million in 2008, Phorm’s only UK business hope rests with Virgin Media (NSDQ: VMED), its third ISP partner, although BT hasn’t ruled out deployment entirely. Like BT, Virgin remains interested in targeted ads but is talking with other suppliers. Phorm is keen to stress Virgin’s continued interest, but we think it’s now unlikely Virgin will bite. CEO Neil Berkett has already told investors its behavioural plans “probably won’t be with the Phorms of the world” and has “no timescales on when, or if” it will trial the service.

All of which could mean that, just a few months after appointing a UK-based board, soon all Phorm’s hopes will be rest in securing overseas ISP deployments. To its credit, Phorm is in the middle of a market trial with SK, South Korea’s biggest ISP, and says it’s in talks with ISPs in 15 other markets worldwide. But it needs to turn trials into revenue sooner rather than later.

• BT Goes Cold On Phorm; UK Now Drying Up For Ad Company
• Earnings: Phorm Burning Through £1.1 Million A Month