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Carphone Warehouse Broadband Growth slows

Carphone Warehouse yesterday announced its second quarter trading update for the 13 weeks to 29 September 2007.

Second quarter highlights

• Total connections up 19.2% to 2.8m

• Subscription connections up 9.3% to 1.1m; up 13.1% excluding 'off-the-page' performance

• 89,000 broadband net adds, taking the base to 2.5m

• 411,000 broadband customers unbundled, taking the on-net base to 1.4m, or 55% of the base

• 500 further exchanges unbundled (137 TalkTalk, 363 AOL), taking the total number of unbundled exchanges to 2,212

Charles Dunstone, Chief Executive Officer, said:

'After an excellent operational performance, we expect to report headline pre-tax profits of £53-56m for the first half, and are confident of the full year outlook.

'In our Distribution business, overall mobile connections growth remains very good and our market share is growing strongly, with continued strength in the pre-pay business offsetting the softer UK direct response market. Our selection as a distributor of the iPhone in the UK is a major endorsement of our retail model and customer proposition, and we expect its launch in November to give us a significant competitive advantage.

'I am very pleased with the progress we have made in our fixed line business, with visibility of future profitable growth increasing all the time. We now have over one million TalkTalk broadband customers, while the focus in AOL has been on customer migrations and network roll-out. As a result, over 80% of all new broadband customers are now connected directly to our own network. We are well ahead of schedule for migrating existing customers to our own network; we have the most extensive unbundled coverage in the UK; and customer service unit costs are falling as our processes improve.'


Total connections were up 19.2% to 2.8m year-on-year in the 13 weeks to 29 September 2007. Subscription connections were up 9.3% to 1.1m, with a continued good performance by the store portfolio offset by persistent weakness in the direct response market in the UK.

Subscriptions connections growth excluding this channel was 13.1%, and we continue to grow our market share. Pre-pay connections were up 26.8% to 1.6m, reflecting ongoing strength in the pre-pay segment. We opened 60 net new stores in the period, taking the base to 2,337. The Insurance customer base was up 14.1% year-on-year to 2.4m.

UK Fixed Line

During the period, we added 89,000 customers to our broadband base, taking our total customer base to 2.5m. In September we launched our partnership with Dell, offering free laptops with an AOL broadband subscription.

The positive impact on AOL sales, combined with a slight improvement in the runrate of TalkTalk sales, translated into a stronger performance in the last month of the quarter.

We expect to add 200,000-250,000 broadband customers over the second half of the year.

We made excellent progress with our network roll-out over the quarter. We unbundled a further 137 TalkTalk exchanges and a further 363 AOL exchanges, taking the totals to 1,384 and 828 respectively. We also connected an additional 411,000 customers to our own network, taking our total of on-net customers to 1.4m, or 55% of our broadband base.

Our business now accounts for 43% of all unbundled lines in the UK market. With underlying network economics absolutely in line with our original projections, this gives us increasingly good visibility of future profitable growth.

Our total voice customer base of 2.7m, combining voice only customers with those who take bundled voice and broadband, returned to growth in the quarter, reflecting the success of selling voice services into the AOL broadband base.

Désiré has been musing and writing about technology during a career spanning four decades. He dabbled in website building and web hosting when DHTML and frames were en vogue and started writing about the impact of technology on society just before the start of the Y2K hysteria at the turn of the last millennium. Following an eight-year stint at where he discovered the joys of global tech-fests, Désiré now heads up TechRadar Pro. Previously he was a freelance technology journalist at Incisive Media, Breakthrough Publishing and Vnunet, and Business Magazine. He also launched and hosted the first Tech Radio Show on Radio Plus.