Carphone Warehouse 2006 Annual Report Download - page 10

Becoming the leading alternative fixed line
provider in the UK
We have set our UK fixed line operations a bold
objective but one that we believe, with the combination
of assets that we have at our disposal, is achievable:
to become the leading alternative fixed line provider.
Four years ago, we had no presence in the fixed line
market. Through the combination of acquisitions and
strong organic growth, we have built a business that
now has a 10% share of the residential market for
voice calls and is the clear number three operator. The
highlights of the year were our acquisitions of Onetel
and Tele2 UK, two of our biggest competitors in the
Carrier Pre-Select (CPS) market, which not only took our
combined customer base to 2.6m at the year end but
also underlined the success of our own business model.
We have always maintained that the ability to recruit
customers through our store base has given us
a much lower overall cost of customer acquisition,
and our ownership of a highly efficient voice network
in Opal has allowed us to generate an attractive and
sustainable margin on our tariffs. These deals
demonstrate that our strategy to date has been the
right one, and we expect the combined residential CPS
businesses to deliver a contribution of approximately
£50m in the coming year. A key goal this year will be
to sell line rental as well as voice services to as many of
our customers as possible. While there is no additional
margin in the wholesale line rental product, it does
serve to strengthen the customer relationship. We aim
to have 60% of our CPS customers on our own line
rental service by March 2007.
The most important development of the last 12 months
has been the establishment by the regulator, Ofcom,
of a structure for the industry that encourages
infrastructure-based competition on a level playing
field. As a result, we have announced plans to invest
in local loop unbundling, a process that allows us to
install our own exchange equipment on BT’s premises,
and take over the copper wire between a customer’s
house and the local exchange at fair rates.
On 11 April 2006, we were pleased to announce
our new proposition: TalkTalk broadband for free, for
customers who take our line rental and Talk 3 calls
package. This offer has re-priced the broadband
market in the UK, undercutting similar bundled tariffs
from competitors by up to 60%. Our approach has
6
Smart
methodologies
driving improved
performance
INVESTMENT
Our long-term approach to investment creates
sustainable competitive advantage in our
chosen markets. Investment is not just about
capex – although our commitment to store
openings and exchange unbundling is
significant – it is also about marketing,
brand-building and customer recruitment.
PROPOSITION
We are absolutely committed to delivering
value to customers across all our services.
Investment in the right platforms is key to
our ability to develop a compelling customer
proposition, as it allows us to build scale
and offer greater value.
SCALE
We aim to be a mass market provider in our
major business lines by driving for volume
ahead of margin. We then use our increased
presence in the market to improve our supplier
terms and reinvest these benefits in the
customer proposition.
EFFICIENCY
Scale also creates significant efficiencies for
our business, through leveraging our fixed cost
store base and telecoms infrastructure. We
seek to maintain our competitive advantage
by continued investment across the business.