Carphone underlying earnings sneak ahead of expectations; broadband promises bright future

6 Jun 2006

European telecoms service provider and mobile retailer Carphone Warehouse has posted a 35.5% hike in annual headline pre-tax profit and is predicting a bright future on the back of its much hyped discount UK broadband service. In the 52 weeks ended 1 April 2006 Carphone recorded headline pre-tax profit of GBP136.1 million (USD257 million), ahead of an average market forecast of GBP134.7 million; headline EBITDA rose 36.6% to GBP162 million, on the back of a 29.4% rise in revenues, up to GBP3.046 billion. Including goodwill amortisation and reorganisation costs, pre-tax profit stood at GBP81 million (down 11.9%), EBITDA was GBP220.2 million and net profit GBP70.5 million.

In April Carphone’s UK fixed line business TalkTalk announced the launch of so-called ‘free’ broadband to all new customers taking a phone service over newly unbundled lines. For GBP20.99 (USD36.53) per month users can receive unlimited local and national landline calls, unlimited international landline calls to 28 countries and broadband access at up to 8Mbps. The company says initial take-up of the new service has exceeded predictions with 340,000 customers applying for the product so far. Migration to unbundled lines is due to start in July, with the company delivering 200 exchanges at launch. It expects to have 3.5 million TalkTalk UK residential customers utilising 1,000 unbundled exchanges (providing coverage of 70% of the population) by March 2009, of which over half will be combined voice and broadband customers. It says the launch of free broadband will result in an operating loss of around GBP50 million in the year to March 2007, but it expects the service to contribute between GBP30 million and GBP40 million incremental profit the following fiscal year.

United Kingdom, TalkTalk