Carphone Warehouse 2005 Annual Report Download - page 11

KEY TARGETS
further development of broadband, and the introduction
of line rental, will both be key strategic initiatives in the
coming year, and central to our aim of becoming a mass
market provider of telecoms services to the home. We
have set a long-term target of 2 million voice customers
in the UK by March 2008, and expect to have 100,000-
150,000 broadband customers by March 2006.
On the mobile side, we have recently renewed our
strategic focus on our MVNO strategy. During the year
we launched a virtual network in France, Breizh Mobile
– the first service of its kind in that country. We have
cut our tariffs aggressively on Fresh, our UK virtual
network, and intend to remain the price leader in the
discount segment of the market. In April 2005, we
launched Mobile World, a highly innovative mobile
service offering international tariffs that compete head-
on with the cheapest available fixed line international
tariffs. The initial response to the launch has exceeded
our expectations and we are in the process of
expanding its distribution, as planned, into thousands
of third-party outlets across the UK.
Growing our business-to-business fixed line operations
Opal has consolidated well on its outstanding year
of growth last year. The business mix has improved
significantly towards directly-managed customers and
traffic growth has continued to be strong. Excluding
TalkTalk traffic, minutes carried rose by 20.9% year-on-
year to 5.45 billion. We also began to consolidate the
smaller end of the alternative carrier market, acquiring
a number of resellers during the year.
We are excited about the ongoing growth prospects
for Opal, with its continued strong focus on sales and
marketing. We intend to grow the Opal business both
by winning new customers and by broadening the
range of services we provide to existing customers.
We launched line rental successfully this year and
will extend its roll-out in the coming year, while also
providing DSL-based broadband services for the first
time. In addition, we believe that there is strong demand
from our business customer base for mobile services,
and we will invest in the coming year in growing our
corporate mobile proposition to meet that demand.
Maximising customer lifetime value
Since before our IPO five years ago, we have been
looking at ways to broaden our business model by
introducing new products and services where we
can add value both to our customers and our mobile
network partners, and improve the quality and visibility
of our earnings. With 56.1% of Group contribution this
year coming from recurring sources, the financial case
for this strategy is clear. At the same time, we have
achieved compound annual growth in these recurring
profit streams of 47.4% over the last five years.
We have always operated on the basic premise that if
we provide a good service for our customers, they are
more likely to reward us with their loyalty. Similarly, if we
can demonstrate good customer traction to the mobile
network operators, we become more of a value-added
partner to them rather than simply a recruitment channel.
This has allowed us to structure customer management
agreements with a number of networks in the UK and
France, and to share in the ongoing value of the
customers we recruit via revenue-sharing agreements.
More recently we have launched residential fixed line
services. Within just two years, we have made TalkTalk
in the UK the clear number one alternative to BT and
now take up to 50% of all customers who leave BT
each month. TalkTalk UK has moved into profitability
already and will be a major driver of Group profits
growth over the medium term.
We have been very active this year in evolving our
fixed line strategy. TalkTalk has now been launched
in France, Spain, Germany and Switzerland, and we
have moved into Ireland and Belgium since the year
end. Our UK business launched a very competitive
broadband service in November 2004, and the
customer response has comfortably exceeded our
expectations. We are now reviewing our options to
assess the most effective way to build a significant
and profitable broadband business while continuing to
deliver outstanding value to our broadband customers.
Looking ahead, we see numerous opportunities to build
on the platform we have created by providing additional
services to our customers. On the fixed line side, the
Chief Executive Officer’s Review continued www.cpwplc.com
10%
MARKET SHARE OF
MOBILE PHONE MARKET
2m
TALKTALK UK CUSTOMERS
BY MARCH 2008
250
STORE OPENINGS THIS YEAR
7