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Carphone Warehouse, Europe’s largest mobile retailer, on Tuesday admitted customer response to its new “free broadband” service, launched only in April, had far outstripped expectations.

Carphone said it had signed up 340,000 customers, double its target, for the service which is offered in conjunction with its fixed-line TalkTalk package.

It also said it had connected more people in the first eight weeks of the offer than it planned to do in the first four months. Of the 340,000 applications, Carphone estimated around 40 per cent came from existing broadband customers.

Charles Dunstone, chief executive said the main problem was satisfying customer demand. The call centres have been receiving around 20,000 calls per day compared to a normal 7,000.

Carphone’s push has been criticised by rivals. Steve Horley, managing director, Tiscali consumer products and marketing, said the plan “was irresponsible marketing and bad practice”.

Carphone was marketing a product it could not provide “within the normal parameters of the broadband industry, which is within 15 days,” he said.

But Mr Dunstone said the group was still connecting broadband services ahead of dates it had promised customers.

The group maintained its prediction that it would make an operating loss of £50m ($93m, €73m) from the project in the current year. A full payback on the investment is expected in the next four years.

“The [340,000] figure is well ahead of our top of the range expectations,” said Christian Maher, analyst at Investec Securities.

“These customers have given their postcode and billing details and we would expect 90 per cent of them in due course,” he said.

Carphone reported full-year results for the year to April 1 slightly ahead of expectations.

Revenues rose 29.4 per cent to more than £3bn for the first time while pre-tax profits, before amortization and restructuring costs, rose 35.5 per cent to £136.1m.

The group spent heavily bolstering its position in the residential calls and broadband markets with the acquisitions of Onetel, the telecoms arm of Centrica, and the British and Irish businesses of Sweden’s Tele2.

The shares closed up 8p at 339½p, giving it a market capitalisation of £3bn and putting it on the brink of entry to the FTSE 100. It also proposed a final dividend of 1.75p per share, resulting in a final dividend of 2.5p, up 38.9 per cent on a year ago.

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