Business Watch: CPW bounce

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Customer connections at Best Buy Europe, Carphone’s retail joint venture with US electricals giant Best Buy, were up two per cent to 3.17 million in the three months to September 30.

The figures beat City analysts’ forecasts and provided evidence if it were needed that the company’s sheer scale has protected it from the worst effects of the recession.

In the same quarter, European market handset sales fell 15 per cent, revealing that Carphone is still seizing market share as some smaller mobile retailers fall by the way side.

The figures were also impressive because the same quarter last year saw the launch of the 3G iPhone, which made for tough comparisons this time.

But before we get carried away, it is worth noting that Carphone actually held its full-year guidance to increase earnings per share by 10 per cent.
If the company was genuinely convinced that a consumer turnaround is on its way it would probably have raised its forecasts.

Indeed, finance director Roger Taylor was decidedly cautious about consumer spending. “We see this current consumer environment potentially sustained for another 12 to 18 months,” he told Reuters.

“The worst seems to be over … but there’s not much ground for there to be a huge upturn in the economy either,” he said, pointing to growing unemployment and the prospect of tax rises.

Carphone also says it remains cautious ahead of the key Christmas period, which is small wonder, given that experts at Enders Analysis are predicting a nightmare at Christmas for the mobile industry.

Enders reckons sales of mobiles across Europe will fall by between 10 per cent and 15 per cent in the current quarter.

Nevertheless, Taylor and Dunstone remain quietly confident about festive sales, with growing competition to Apple’s iPhone likely to stoke demand. Taylor referenced LG’s BL40 Chocolate phone and Sony Ericsson’s 12-megapixel cameraphone  Satio among others.

Big box format stores
Meanwhile, Best Buy Europe is pushing on with delayed plans to open the first of its megastores, starting in April next year, with Southampton and Thurrock.

Originally, the venture had planned to have some of these big box units open by now but the global financial crisis put paid to that – proving that Carphone is indeed far from recession proof.

But now the company has signed leases for five sites and says it’s in talks over twice as many sites again that will open if the first are deemed to have performed well over their opening few months.

Whether the brand will be overstretched and whether there will be sufficient consumer demand by next year remains to be seen. What is clear is that it’s going to be a very big Spring 2010 for Carphone as the company is planning to split in two in March.

TalkTalk demerger
And it’s Carphone’s other business, the broadband and phone division TalkTalk, that investors are keeping the closest eye on after it emerged that TalkTalk had inherited 160,000 fewer broadband customers than expected following its takeover of Tiscali’s UK business.

“At the newly acquired Tiscali UK, the inevitable skeletons are starting to emerge from their cupboards,” said James Barford at Enders.

“Management appears well prepared for the challenges, although it is early days.”

Full article in Mobile News issue 450 (out October 19).

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