The Carphone Warehouse Plc has seen a massive fall in net income, as the costs associated with its free broadband offer impacted its bottom-line figures.
Although Carphone Warehouse reported a 60% increase in its headline half yearly profit to 59.3m pounds ($113m), when all the costs associated with setting up its free broadband access offer and the launch of Virgin Mobile France are included, the company’s actual net income figure for the six months ending September 30 fells dramatically to just 691,000 pounds ($1.32m). This is compared to a net profit of 24.6m pounds ($47m) in the year ago period.
Revenues however up 40.2% to 1.81bn pounds ($3.45bn), compared to 1.29bn pounds ($2.46bn) in the same period last year. When the acquisition of Onetel is excluded, sales still rose a healthy 29.1%.
Shares in Carphone rose 3.7% to 283.5 pence ($5.40) on the London Stock Exchange on Thursday.
This has been a busy six months, during which Carphone Warehouse has delivered another very strong set of results and invested significantly in building its platform for future growth, said chief executive Charles Dunstone in a statement.
In April, the London, UK based company underlined its transformation from a mobile phone retailer into one of the UK’s largest broadband and communications providers, when it sparked a price war with its offer of free broadband.
Unfortunately, Carphone’s infrastructure was quickly swamped by the huge demand, forcing delays and numerous complaints about its lack of call centre capacity, which Carphone has been working hard to improve.
During the six months, Carphone has also launched a MVO (mobile virtual operator) with Virgin Mobile in France, and in October it purchased AOL UK for 370m pounds ($686m).
But just a day following that deal, Carphone shares were hit hard when it emerged that Vodafone Group Plc had ditched Carphone as the retailer of it’s contract phones. The affect of this has yet to be felt according to Dunstone, although he revealed that the two are now talking of a pan-European framework agreement.
It is intended that this agreement will encompass subscription and pre-pay connections, where appropriate, said Dunstone.
Meanwhile, the AOL deal means that Carphone’s TalkTalk is now the third largest broadband provider in the UK, with a customer base of 2 million, compared to 2.2 million for BT Group Plc and 2.9 million for NTL Corp.
Regarding its local loop unbundling (LLU) progress so far, the company insists that it is on target to unbundle 1,000 telephone exchanges by May next year. However, it has so far only unbundled 370 exchanges, and will have to speed this process up if it hopes to meet this target. It has migrated 40,000 customers in October to LLU, taking the total to a modest 60,000.