Carphone Warehouse upbeat on mobile sales

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Carphone Warehouse’s shares fell nearly 4 per cent on Thursday after its management struggled to convince investors that its retail and telecoms businesses were on track.

Europe’s biggest mobile phone retailer reported pre-tax losses of £4.7m for the first half of its 2006-07 financial year, principally because of losses in its fast-expanding broadband business.

Some analysts expressed fears about Carphone’s mobile retail business, even though it announced it was in talks with Vodafone about a pan-European sales agreement.

Carphone’s shares fell sharply after the world’s biggest mobile operator said on October 12 that it would no longer use the retailer for sales of handsets on monthly contracts in the UK. The shares fell 11p on Thursday to close at 283.5p.

The pre-tax loss of £4.7m for the six months ending on September 30 compares with a profit of £32.5m for the same period last year, and was due to amortisation of intangible assets and start-up losses in the broadband business.

But management underlined its belief in Carphone’s prospects by raising the dividend 33 per cent. Charles Dunstone, Carphone chief executive, said he was “incredibly confident” he could continue to sell “an awful lot of mobile phones”, adding that the broadband losses were “peaking”.

Carphone’s earnings before tax, interest, depreciation and amortisation, excluding £37.7m of broadband losses, rose 44 per cent to £120.8m. Revenues increased 40 per cent to £1.8bn.

Mr Dunstone said he hoped the talks with Vodafone would “in time” prompt the mobile operator to rehire Carphone for sales of handsets on monthly contracts in the UK.

A Vodafone spokesman said the talks with Carphone were at an “early stage”.

Vodafone’s UK business has entered into an exclusive deal with Phones4U for sales of handsets on monthly contracts that runs until December next year.

A pan-European sales agreement between Carphone and Vodafone is under discussion because the retailer’s stores in continental Europe include phones for use on the mobile operator’s networks.

Mr Dunstone said Vodafone’s rivals had not pressed him for cuts in the commissions they pay Carphone for sales of phones.

Peter Erskine, chief executive of O2, said last month that his group would seek reductions.

Halting losses in Carphone’s broadband business hinges on the group supplying them with internet access over its telecoms network. The vast majority of the 547,000 people who had signed up for Carphone’s “free” broadband by September 30 are currently getting their internet access via a BT wholesale product.

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