Carphone warns of further broadband costs in UK

Carphone Warehouse today warned of additional costs of up to £15m (€22m) as it battles ongoing customer service problems at its TalkTalk broadband arm.

The company said the costs were likely to be ahead of its business plan for much of the coming financial year, although it stressed that protecting the brand for the longer term was more important than profitability.

Carphone has been deluged with complaints following “unprecedented” levels of demand for its TalkTalk broadband offer, which provided free high-speed internet to those customers paying £20 (€30) a month for a landline phone.

The company is expected to incur broadband start-up costs of around £70m (€103m) in the current financial year, which came to an end this week. It added today that it would take between £10m (€15m) and £15m (€22m) in additional customer service costs in the new financial period.

It said it was confident that by the end of the financial year the increasing scale of its customer base and the ongoing improvement in its processes would result in unit customer service costs in line with original plans.

Chief executive Charles Dunstone has already admitted that the offer of free broadband created a customer service “nightmare” for the firm.

Carphone has hired hundreds of extra staff as it struggled to cope with the higher than expected levels of demand.

It has also had to pay to use BT products while it waits for its own high-speed internet access into homes to be fitted, a process involving the “unbundling” of BT exchanges.

Mr Dunstone said the company had met its target of unbundling 1,000 exchanges two months ahead of schedule.

The company finished the financial year with 2.27 million broadband customers across TalkTalk and AOL UK, which it bought last year in the biggest deal in Carphone’s history.

It said sign-ups picked up materially from the middle of February in response to a more targeted marketing campaign and renewed customer confidence in the service.

At Carphone’s retail arm, total connections were up 8.3% to 2.41 million, with the number of subscription connections ahead 14% for the 13 weeks to March 31. The group is Europe’s biggest mobile phone retailer.