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April 1, 2004

Carphone Warehouse squares up to BT

The Carphone Warehouse Group Plc, Europe's biggest mobile handset retailer, has launched a fixed-line service that offers its subscribers free calls, a move sure to anger BT Group Plc, which still controls 70% of the UK's fixed line market.

By CBR Staff Writer

The service known as TalkTalk was launched on April 1. It allows free-of-charge calls between TalkTalk residential customers, regardless of time of day or length of call. The idea is to encourage groups of friends or family to sign up, with the lure of being able to speak to other free at any time of the day, and regardless of whether it is a local or national call.

This can viewed as a direct challenge to BT’s discounted Friends and Family scheme, and is yet another assault on the former UK national carrier, which is also coming under fire for its slow roll-out of broadband access and services in the United Kingdom.

To make matters worse for BT, Carphone Warehouse CEO, Charles Dunstone, revealed that it is also planning to offer free international calls between TalkTalk customers in a number of its European markets.

In the meantime, The Carphone Warehouse issued a trading update for the fourth quarter, reporting healthy gains, but also warning of slower growth in the mobile sector for the forthcoming year. For the period, it has reported a 30% growth in mobile connections to 1.44 million, while it has also signed up 146,000 new TalkTalk customers bringing the total to 385,000.

Our fourth quarter trading performance has been a fitting end to a record year, said Dunstone. The mobile market has continued to be buoyant and we have strengthened our competitive position within it. In fixed line we have begun to shake up the UK market and are laying the foundations for growth across Europe. As a result of our success we anticipate that full year profits will be at the top end of market forecasts, with earnings per share exceeding forecasts.

London, UK-based Carphone Warehouse also announced it is to acquire N Tel Com GmbH, a Swiss switchless reseller, for 13.3m pounds ($24.7m). It will use the company as a springboard to enter other European markets, including Germany.

Last year, N Tel generated revenue of CHF 41.1m ($32.6m) and an operating profit of CHF 4.6m ($3.6m) from 44,000 customers, 90% of whom are residential.

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Carphone Warehouse said in a statement: N Tel is achieving good organic growth in its own right and will continue to be run as a stand alone business, but we intend to enhance its long term potential by developing tariffs to be distributed through our Phone House stores that will reflect the new free calls initiative.

The purchase comes hot on the heels of The Carphone Warehouse’s acquisition of Xtra Telecom for for 16.5m pounds ($30.5m) in early March, which has given it access to the Spanish market.

It also opened 12 new stores during the fourth quarter, and finished the year with 1,214 stores in total. Over the next year, it plans to open another 200 new stores, mostly in the UK, Spain and France.

Looking forward, the company was less upbeat on conditions for the year to March 2005. It said year-on-year comparisons in the mobile market are expected to grow more challenging with forecast connection growth of about 15%. The main growth engine is expected to be in pre-pay services.

This article is based on material originally published by ComputerWire

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