Carphone blames BT for backlogin broadband

By Andrew Parker, Financial Times
Published: Apr 24, 2007

Carphone Warehouse, the UK's third-largest provider of high-speed internet access, hasadmitted that it will be at least October before it clears a backlog of 260,000 lossmaking "free" broadband customers.

Charles Dunstone, Carphone's chief executive, said in an interview with the Financial Times that it could take until the end of 2007 to solve the problem and pinned the blame on BT.

However, Carphone claims it can compensate for the losses by expanding the reach of its telecommunications network, enabling it to recruit more profitable customers than originally planned.

In an analysts' briefing today, Carphone will also say it is making a big push into the US mobile phone retail market.

Carphone's joint venture with Best Buy, the US retailer, is to open 150 to 200 stores selling mobiles after trials in New York.

Carphone unleashed a broadband price war in April last year by offering "free" broadband to customers who signed up to its £21-per-month fixed-line Talk Talk phone service.

Carphone estimates that it makes a loss of £5 per Talk Talk customer per month while they get their phone and broadband service through wholesale products the company buys from BT.

The customers only become profitable when they are connectedto Carphone's telecoms network. That switch has been delayed for thousands of customers.

Mr Dunstone strongly criticised BT Openreach, the former state monopoly's division that is responsible for connecting the customers to Carphone's network. He said he was the"victim" of Openreach's failure.

The delays were the main factor behind Carphone warning last October that the operating loss in its Talk Talk broadband business would rise from the £50m originally expected in 2006-07 to £70m.

This month, Carphone warned the operating profit for the broadband business in 2007-08 could be halved, to £15m.

Mr Dunstone said the backlog of lossmaking Talk Talk "free" broadband customers, which stood at an estimated 260,000 at March 31, should be put on to Carphone's network by the autumn or"certainly by the end of the year".

Carphone has installed equipment in 1,000 of BT's phone exchanges to connect customers to its network. Carphone is to put equipment into 500 more exch-anges, enabling it to offer broadband on its network to 85-90 per cent of the UK population rather than the 70-75 per cent planned.