Carphone Talks on Broadband

Carphone Warehouse, Europe’s largest mobile phone retailer, said that it had signed up 340,000 customers for its free broadband offering, twice as many as it was expecting two months after launch, as it reported underlying pre-tax profits up by 35.5 per cent to £136.1m ($ 255m).

However, this unexpected rise had caused a "hiring strain" on call centres as it takes weeks to hire new operator.
By 5 June 340,000 customers had signed up. Of these 240,000 customers already had their line rental set up and were receiving calls, and a further 100,000 had this service as well as broadband.

It seems that Carphone has become a victim of its own success with some customers told they will have to wait for up to 12 weeks to be connected to the service. Consumers have also been critical of the amount of time it takes to get through to Carphone's call centres or to sign up on the website.

Warehouse chief executive and founder Charles Dunstone said, “Our aim was to change the UK broadband market forever, and there is no doubt that we are well on the way to achieving this.”

For the year that ended in March, before the broadband launch, Carphone's profits soared 36% to £136.1m on sales up 29% at £3.06bn. The dividend rises 39% to 2.5p.

This means that means Dunstone, the largest shareholder with a 33% stake, collects £7.45m on top of his £675,000 salary. Co-founder David Ross receives dividends worth £4.85m.

The company, which is anticipating a £50m operating loss from the free broadband proposition, stuck by estimates of incremental profit from unbundled broadband services of £30m - £40m in the year to March 2008, with full payback on the cash investment within four years.

Statutory pre-tax profits for the 52 weeks ended April 1, were hit by re-organization costs of £35.2m and amortization of £19.8m, and decreased by 11.9 per cent to £81m. Earnings per share decreased by 5.3 per cent to 7.99p. Revenues rose by 29.4 per cent to £3.05bn.

Operating profits were £86.71m compared with £96.78m last time. The board is proposing a final dividend of 1.75p, bringing the total for the year to 2.5p, up 38.9 per cent on last year.
Shares were down 1.2 per cent in early trade at 327½p in London.