Carphone Warehouse, Europe’s biggest mobile phone retailer, said it was still struggling to keep up with demand for the group’s “free” broadband offer.

The group said that 476,000 people had applied for the retailer’s bundled voice and broadband service since it launched in April. But it admitted that only half of that figure had been connected to the internet as call centres struggled to keep up with demand.

Charles Dunstone, chief executive of Carphone Warehouse, admitted the company had initially underestimated demand but said that the extra call-centre capacity in June was having a noticeable effect.

He added that the lead time for customers to be connected to the internet had stabilised at six to seven weeks, which is slightly longer than rivals such as BT. But he pledged to bring the figure down further.

“We’re getting back into the zone of being competitive,” he said. “The board have confidence we’ve turned the corner on this issue.”

He added: “We still have some way to go, however, to reach the leading service levels we target, and I take personal responsibility for ensuring we achieve these.”

The group added that about half of the applications for its service were coming from customers of competitors in the fierce UK broadband market.

Orange, the mobile phone group and BSkyB, the satellite broadcaster, have entered the market in recent months with their own bundled packages.

BT Group, which also reported first-quarter figures, estimated that more than 40 per cent of all UK homes now subscribe to broadband services.

Overall, its distribution unit, which includes main high-street retail and online operations, saw revenues rise 29.7 per cent to £394.3m.

The group also said its telecommunications business was expanding strongly. Total fixed-line revenues climbed twofold to £257.4m, thanks, in part, to the acquisitions of Onetel from Centrica and Tele2 UK, as well as demand for its TalkTalk service. Carphone shares fell 13¾p to 271¾p.

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