Customer service deficiencies and problems with the company’s TalkTalk broadband service caused Charles Dunstone, CEO of Carphone Warehouse, Europe’s largest mobile phone retailer, to describe the company last fiscal year as ‘tumultuous.’ Carphone operates about 770 retail stores in the UK and hundreds more on the continent.
The problems kept the company’s profits low, but Dunstone said, there will be improving profitability ahead with strong demand for new mobile handsets. ‘We’ve seen a pretty strong start to the year driven by a number of critical handset launches,’ he said, adding that fashion and technology are bringing customers back to buy new models.
The company said that the cost of launching the broadband service – £72 million so far – and the cost of a launching Virgin Mobile France, a joint venture with Sir Richard Branson, reduced profits by 10% in the financial year ending March 31. However, sales increased about one-third to £3.99 billion ($8 billion) and the company announced a 30% increase in its annual dividend.
Carphone, which acquired AOL UK, said it now has 2.3 million broadband customers – 16% of the UK market – and is the UK’s third-largest broadband service. Dunstone said the company’s goal is 3.5 million broadband subscribers after three years.
Most new broadband customers are now connected within 20 days, the company said, unlike when it first announced its ‘free’ TalkTalk service, when orders swamped it. Some 700,000, or 30%, of TalkTalk users are on unbundled lines, meaning Carphone pays less to BT. For the other 70%, Carphone has to use the BT infrastructure and pay the incumbent telco about £5 a month per broadband subscriber. Carphone ends up losing money on those customers, rather than making the £7 a month it nets when it uses its own infrastructure.
The company said it hopes to have 70% of its broadband subscribers on its own network by next March.
Dunstone said more well-known designers will get involved in handset design, as Prada has done with an LG phone. ‘I think it’s going to be an increasing trend,’ he said. ‘Designers had moved into perfumes and then glasses and now mobile phones are the obvious brand extension.’
Phones on the cutting edge of technology are also attracting buyers, he said.
Design and technology plus the cool factor – is it no wonder Dunstone wants the iPhone so much?