LONDON -(Dow Jones)- Carphone Warehouse Group, the UK broadband and mobile phone provider, Tuesday said that it plans to attract 3.5 million broadband customers by March 2010, and unveiled USA retail expansion plans that will see it operating in up to 200 stores over the next 18 months.
In a strategy update ahead of an analyst conference in London Tuesday, the company also updated on outlook, saying it expected strong performance for the year to March 2008, including a 15% rise in mobile phone subscription customers.
Speaking to Dow Jones Newswires later Tuesday, Carphone Warehouse's Chief Financial Officer Roger Taylor said that he hoped the company would achieve significant revenues from the U.S. in coming years, and planned to open 150 to 200 stores in conjunction with retailer Best Buy in the next 18 months, under the Best Buy Mobile brand.
"Carphone has got 2,200 stores in Europe and we could see the U.S. becoming this big in coming years, but at the moment we're doing this one step at a time," said Taylor. Best Buy and Carphone have also launched a home support service in the U.K. called Geek Squad, whereby they will help residential customers with IT problems.
Carphone added it would allocate GBP220 million on capital expenditure for its U.S. expansion and U.K broadband network rollout. The company also plans to open 250 new stores across Europe this year, and sees revenue growth in its mobile phone retail division of 11%-13%.
"We continue to see ample opportunities for long term growth in existing and new business areas, and plan to reinvest a significant proportion of cash generated this year into building this growth platform," said Chief Executive Charles Dunstone in a statement.
At 0905GMT, shares in Carphone Warehouse remained relatively flat at 299.75 pence.
David Thomson, an analyst at brokerage Bryan Garnier, said that Carphone's U.S. retail and U.K. broadband expansions were ambitious but encouraging.
"The expansion of 150 to 200 stores in the US is aggressive, but in line with the strategy of a growth company like Carphone," said Thomson, who maintains a buy rating.
In its fixed line broadband and telephony business, Carphone expects to see revenues grow approximately 45%, with earnings before interest and tax margins growing to approximately 7% from around 1.5%, as the affects of moving customers over to unbundled lines starts to take affect.
Unbundling is a process whereby broadband providers, such as Carphone Warehouse, can install their own equipment in local telephone exchanges run by BT Group.
Service providers say this can prove cheaper than renting the infrastructure from the incumbent operator.
Numis Securities analyst Steve Davies notes that, in addition to having 3.5 million broadband customers by March 2010, Carphone is now looking to unbundle a further 600 exchanges in the UK, which would give a penetration of 80% of the population.
"Based on current expectations of at least GBP7 contribution per customer per month in a fully unbundled world, we would expect a broadband customer base of this magnitude to generate EBIT in excess of GBP200m," said Davies, maintaining a buy rating.
Earlier in April, Carphone said it was in advanced discussions with U.S. retailer Best Buy to co-market mobile phones and computer services through Best Buy Mobile in the United States and Geek Squad in the U.K. Carphone said, at the time, that the joint venture, plus another with Virgin Mobile in France, was likely to have an incremental investment impact of GBP10 million to GBP15 million.
Chief Executive Charles Dunstone also said in early April that trials of the Geek Squad in the U.K. had been encouraging and was providing a good way of promoting both its core mobile retail services and its more recent broadband business.
Carphone Warehouse sells mobile phones and related products and services in more than 1,900 stores in the U.K., Ireland, Spain, France, Portugal, Netherlands, Belgium, Germany, Sweden and Switzerland.
Company Web site: http://www.cpwplc.com
-By Daniel Thomas, Dow Jones Newswires; 44-20-7842-9264; firstname.lastname@example.org
(END) Dow Jones Newswires "
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