‘A scrappy British retailer’
The glass is always half empty in eeyorish Britain, and half full in yeehah USA. A case in point is the way in which yesterday’s announcement of poorer than expected results by Carphone Warehouse (CPW) was covered on either side of the pond.
The US approach is typified by influential market analyst BusinessWeek, which said American mobile operators should pay close attention to CPW because it ‘revolutionized the industry in Britain by being the first seller of phones and mobile services not affiliated with any carrier or handset maker,’ making it ‘a hit with buyers confused by the bewildering variety of mobile service plans and prices.’
‘Since then the company has pioneered one retailing innovation after another,’ the article glowed on.’ It has launched its own name-brand telecom services, including fixed-line, mobile, and broadband access, and rolled out training programs that help consumers get up to speed quickly on new gadgets.’
In its approving, in-depth discussion of the joint venture between CPW and US retailing giant Best Buy, BusinessWeek described CPW as ‘a scrappy British retailer that has thrived by thinking ahead of the curve.’
It emphasised CPW founder and CEO Charles Dunstone’s track record since he formed the company twenty years ago, and awarded a big seal of approval to Dunstone’s view that giving away a laptop with a phone contract was no different to current mobile phone practise.
Since mobile devices are probably going to be both 3G and broadband enabled, the article concluded, CPW’s business plan to offer both looks like a pretty good bet.
Meanwhile, in the UK . . .
British journalists focused on a thirteen percent drop in CPW share-price, on news of fewer than predicted (109,000 instead of 128,000) new broadband subscribers and greater than expected debt. This appears to be an over-reaction when pre-tax profits of £215-220m are anticipated, only slightly below the predicted £225m.
The increase in debt came mainly from the pound’s fall, which inflated CPW’s Euro and the Swiss franc-denominated borrowings by £120 million in Q4. An extra £50m in customer acquisition costs arising from CPW’s free laptop marketing scheme, and a higher than intended investment in building out CPW’s LLU network, account for the rest.
CPW’s mobile division, TalkTalk, reported a 12 percent increase in total connections. Other potentially favourable developments are CPW’s involvement with BT and Virgin Media in Phorm, and the possibility that CPW might hugely increase its broadband subscriber base by acquiring Tiscali.
CPW aims to win 400,000 new broadband customers this year, with a target of 3.5 million in 2010. The group needs to move customers onto its own network to emancipate itself from wholesale line rental from BT, but migrated only 215,000 (against a hoped-for 299,000) in Q4. The company said it is on track to unbundle 75-80 percent of its base (from the current 67 percent) by March 2009.
Price of mobile devices slashed
In a probably unrelated move, CPW and O2 are cutting £100 off the price of Apple’s 8GB iPhone. CPW has made the cut retroactive, offering £100 in gift vouchers to customers who bought the device from CPW in the last 30 days. O2 has not, and will sell at the new price, subject to ‘availability,’ only until 1 June.
Both firms will sell the 8GB device for £169 with contracts starting at £35 a month for 600 minutes, 500 texts and unlimited internet access. The price of the 16GB iPhone is unchanged at £329.
It was to be expected that CPW would lead the way. Dunstone’s fortune is based on the perception that selling hardware is simply the first step in an ongoing customer relationship. The Channel’s future lies in the ‘razors and razor blades’ approach, focusing on more profitable after-sale services.
