Carphone Warehouse outlines expansion plan

UK-based mobile phone retailer the Carphone Warehouse gave more details on its expansion into the consumer electronics market this week, under a £1.1bn deal with US retailer Best Buy.

As the UK company announced its second quarter results on Tuesday, Carphone’s chief executive, Charles Dunstone, revealed that the new venture, known as Best Buy Europe will launch 200 new ‘big box’ stores by 2013.

Under the deal struck in May, Carphone is also contributing its 2,400 European stores under the Carphone Warehouse and Phone House brands as well as its share of its existing relationships with Best Buy.

Carphone made £1.1bn from the sale of 50 per cent of its European and US interests to Best Buy, with Carphone and Best Buy each owning 50 per cent of the new retail business.

Carphone maintains 100 per cent control of its fixed line telecoms business in the UK, comprising TalkTalk, AOL Broadband and Opal; and its share of the Virgin Mobile France joint venture.

“We will focus primarily on larger stores of 30,000 square feet or more, where the overall economics are typically more attractive than for smaller stores. Our first stores will open in the UK next year,” said Dunstone.

On Tuesday Carphone reported that its mobile subscriber base climbed 9 per cent year on year during the second quarter to 3.1 million, with growth driven by postpaid subscriptions, which were up 21 per cent. Mobile broadband sales contributed heavily, supported by the roll out of the company’s bundled laptop offering, and the iPhone 3G also boosted sales.

Prepay connections only climbed 2 per cent to 1.7 million, as the market comes under pressure from weaker consumer spending.

Fixed line broadband net adds during the quarter were 41,000, with the overall base increasing by 35,000 as the company sold a base of 6,000 AOL-branded cable customers to Virgin Media.

The TalkTalk base grew by 82,000, while the AOL base fell by 47,000. Carphone unbundled a net 106,000 customers, taking its total unbundled base to over 2 million. Non-broadband customers fell by 137,000 to 1.3 million.

“Our goal is to double revenues and operating profit for Best Buy Europe between the March 2008 year and the March 2013 year, assuming reasonable economic conditions,” said Dunstone. “In the short term, we expect start-up costs of up to £20m in the current financial year and up to £30m in the year to March 2010, with capex in that year of up to £40m, incorporating new stores, IT and supply chain costs, and our multi-channel strategy.”