Carphone Warehouse profits down 10%

Carphone Warehouse has reported a near-10% fall in annual profits after the Talk Talk owner counted the cost of its troubled launch of free broadband.

Pre-tax profits for the year to March 31 slipped to £123.1m (€181.4m) because of £80.5m (€118.69m) of losses linked to Talk Talk and the start of its Virgin Mobile joint venture in France.

Customer service problems following "unprecedented demand" for free broadband caused costs to spiral in the UK venture.

The company said it had put those problems behind it, adding that it was cutting the price of line rental on its Talk Talk telephone service by 50p to £10.50p.

The group was deluged with complaints following "unprecedented" levels of demand for its Talk Talk offer last year, which provided free high-speed internet to those customers paying £20 (€29.49) a month for a landline phone.

Chief executive Charles Dunstone admitted last year that the offer of free broadband had created a customer service "nightmare" for the firm.

It subsequently hired hundreds of extra staff and put active customer recruitment on hold while it sought to address the problems.

The company has also made progress in migrating broadband customers on to its own lines, meaning that it supplies customers directly rather than feeding its service through a BT line.

Mr Dunstone said: "The customer service issues which arose from the unprecedented response to our free broadband offer have now substantially been addressed."

He added: "Demand continues to be strong and customer confidence in the service is increasing."

Carphone is now the UK's third biggest broadband provider after bolstering the operation with the addition of AOL UK - the biggest deal in Carphone's history.