Carphone confident after strong quarterly sales

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Carphone Warehouse, Europe’s biggest mobile phone retailer, raised its guidance as good handset releases and network provider competition helped boost its third quarter performance.

For the three months to December 31, revenues were 18.4 per cent higher or 7.1 per cent on a like-for-like basis. The group opened 126 net new stores during the third quarter, taking the total number to 1,712. Customer connections were 32.7 per cent higher at 2.73m.

Roger Taylor, chief financial officer, said handset manufacturers had provided a boost. “That market trend has been consistent in the last six to nine months, they’ve got the right product out at the right time. The other half’s obviously the networks and how keen they are for new customers,” he said. The pink Motorola Razr phone, for which Carphone had exclusive rights to sell in the UK and Europe, had done particularly well with most of the 450,000 handsets sold within two months.

Several analysts tipped consensus forecasts to rise to about £135m and Mr Taylor said they could “happily move up” to this amount.

Mobile services revenues were up 20.1 per cent to £121.5m ($214m), while fixed line revenues were up 40.9 per cent to £140.5m. Retail sales grew £421.2m, an increase of 18.4 per cent, and online sales, which the group said would be included in retail sales from the next financial year, grew by 40.1 per cent to £55.5m.

Customer numbers for mobile virtual network operator (MVNO) operations, including its Fresh brand, grew by 224 per cent but the group said that the growth at Fresh and Mobile World would lead to a trading loss of more than £5m due to upfront subsidy costs. Mr Taylor said the relaunch of Fresh in autumn had been more successful than expected, but were more lucrative in the long term than signing up pre-pay customers directly to other networks.

The group also confirmed its plans to launch in early spring an MVNO in France under the Virgin Mobile brand, in a 50/50 joint venture with Virgin and using the Orange network. Mr Taylor said Carphone would also look at launching MVNOs in its other European markets.

Earlier this month, Carphone purchased Planet Phone in Spain, a chain of nine Telefónica Móviles distributors.

Last month the group purchased OneTel, the fixed line telecoms business owned by energy group Centrica, and Spanish operator Tele2’s UK and Irish fixed-line customer base. The deals more than doubled Carphone’s fixed-line customer base to about 2.4m, making it the third-biggest provider of these services.

OneTel will be rebranded under the group’s existing fixed-line business, TalkTalk, in the next two to three months, Mr Taylor said. A condition of the OneTel deal was that the utility would cross-sell TalkTalk services to its own customers. This would commence in four to five weeks, he said.

Freddie George, an analyst at Williams de Broe, said the customer growth of 37.2 per cent was the standout figure. “Most analysts had been looking for 15 to 20 per cent, which would’ve represented a similar trend to the first half,“ he said.

In a note to investors Christian Maher, an analyst at Investec Securities, also said customer growth was more than double forecast figures. Pre-tax profit forecasts for 2006 would be upgraded from £126m to £135m, but Mr Maher advised some caution ahead of the broadband growth plan.

The group this year plans to begin building its own broadband infrastructure, installing equipment in about 1,000 exchanges at an estimated cost of £50m to £60m a year over two to three years.

The shares rose more than 3 per cent above their opening price shortly after trade began before settling back to 269¾, or 1½p higher.

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