Carphone rings up strong profits

High street mobile phone chain Carphone Warehouse said it was on course for continued strong growth after seeing profits soar 22%.

The popularity of camera phones and a strong start for its new residential land-line service “Talktalk” helped drive growth taking profits before exceptional items to £57m (€79.4m) in the year to March 29.

The group also announced that it was boosting its presence in Europe’s largest mobile phone market with the £46.8m (€67.7m) acquisition of Hutchison Telecommunications, a mobile service provider operating in Germany.

The deal, which brings in 670,000 mobile customers – most of whom are high value subscription customers – doubles the group’s share of the German market.

Carphone, which runs 475 stores across the UK, saw the number of high-value subscription customers rise by 8% to 1.91 million during the year.

Chairman Hans Snook said the growth was driven by strong growth in recurring revenues as customers were retained.

He said: “It gives us a solid platform for the future.”

While growth in subscription customers was relatively slow in the first half of the year, this picked up in the second half and growth in the final three months of the year was almost 18%.

But the strongest growth was for pay-as-you-go connections which increased by 22.3%. The company said operators were showing a renewed enthusiasm for pre-pay deals and were investing in the segment again.

Mr Snook said pay-as-you-go deals had followed a cyclical pattern. While operators had initially invested large sums in the sector in order to build up customer bases at the beginning of the mobile boom, this later fell off.

He said operators were now subsidising pre-pay packages again but not on the scale seen before.

Mr Snook said he was “extremely happy” with the performance of Talktalk which has attracted 50,000 domestic customers since its launch in February with another 12,000 in the pipeline.

The service, which is available to any residential BT line subscriber, was designed to cut the cost of national rate phone calls.

Customers continue paying line rental to BT but will have all their calls automatically switched to Talktalk rates without having to dial a separate access code.

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