Carphone Warehouse backs demerger

Carphone Warehouse today said it would press ahead with a demerger of its TalkTalk broadband arm in Britain from the group's retail business.

The mobile and telecoms firm, which has several outlets in Ireland, is set to create two separate listed companies and is proposing to install Carphone founder Charles Dunstone as executive chairman of both businesses.

However, it said the timing of the demerger was unclear, as the move will depend on credit conditions.

The demerger decision came as Carphone announced a "significant improvement" in performance at its TalkTalk broadband business, which notched 74,000 net broadband adds - new customers less those leaving - in the fourth quarter.

Carphone now has 2.8 million subscribers in its TalkTalk broadband business, although it said revenue growth for the current year was expected to be "relatively" flat.

The group outlined a tougher climate for its retail business, which is now jointly owned after US consumer electronics giant Best Buy bought a 50% stake for £1.1bn (€1.24bn) last year.

Best Buy Europe, which includes Carphone's European and US retail stores, is expected to see comparable revenues remain flat or fall by up to 3%, according to Carphone.

However, it is pressing ahead with rollout plans for the Best Buy venture and confirmed aims to open 30 to 40 "Big Box" larger format consumer electronic stores in the year to next March.

Mr Dunstone, chief executive of Carphone, said: "Best Buy Europe's plans to enter the consumer electronics market with Big Box stores are progressing well.

"We are benefiting from the availability of significantly improved sites at considerably lower rental costs, and we aim to launch the initial stores, coupled with a national web offer, by spring next year."

Carphone said the decision to plough on with a demerger, which comes after a review kicked off last November, marks a natural progression for the two businesses, which effectively already operate separately.

The group added: "We believe that a demerger will allow us to create two discrete businesses with distinct investment profiles and improved comparability with sector peers.

"We have already built up two strong management teams within the operating divisions, and as part of the recent reorganisation we have further reduced the shared overhead of the two businesses and thus increased their autonomy."

Carphone has put 450 jobs at risk of redundancy across the company as part of an overhaul to keep costs under control.

It is still consulting with staff and hopes to redeploy many of those affected in other roles.

Cash savings from its restructure will also be put into bringing more of its TalkTalk call centres back onshore, Carphone said.

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