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Carphone Raises Stakes in Head-to-Head With BT

Posted on: Thursday, 28 July 2005, 18:00 CDT

Jul. 28--BT rang up forecast-busting first-quarter earnings today as its upstart rival Carphone Warehouse announced that it has more than a million fixed-line customers and will launch a line-rental package to take on BT head to head next month.

BT chief executive Ben Verwaayen declared: "This has been a great first quarter and builds on the momentum we have seen gathering for more than a year."

The group is concentrating more and more on what it calls its "new wave" businesses such as broadband and international IT contracts. Its revenues rose by 5 percent to £4.78 billion in the three months to the end of June. But pre-tax profits soared by 20 percent to £511 million, with earnings per share up by 25 percent at 4.5p.

But BT admitted that it is continuing to lose revenue and market share in its traditional fixed-line business.

Revenues from traditional services fell by another 9 percent during the quarter, 2 percent of that coming from the cut in charges for calling mobile phones from fixed lines and another large part from people abandoning dial-up internet services.

But Verwaayen also admitted there had been another 2 percent drop in the volume of calls between fixed lines and "a reduction in market share from competitive pressure".

BT hopes that its Fusion service, which combines the benefits of a fixed line with a mobile phone and is to be launched widely in September, will help it retain customers. Already 15,000 people have registered an interest.

Meanwhile, Carphone Warehouse chief executive Charles Dunstone is optimistic that he can sign up even more customers to his fixed-line TalkTalk service now that regulator Ofcom has ordered BT to open up further to its rivals.

From next month Carphone will offer line rental at £9.99 a month against BT's £10.50. Dunstone said this was not so much a money-saving offer as "a response to the fact that people don't really like having to pay two different bills".

He said: "In fact up until next March it will cost us to take on new customers. It is not until April that all the Ofcom price cuts come through and our margins start to rise."

Carphone's fixed-line revenues rose by 33 percent to £125 million and its retail revenues by by 17 percent to £259 million in the 13 weeks to 2 July.

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Source: Evening Standard

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