Carphone Warehouse 2007 Annual Report Download - page 17

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had fallen to 1.86m customers. However, taking into
account our broadband customers who also take
voice services, our total voice base grew to 2.73m.
Underlying profitability from voice services improved
during the year as industry consolidation led to a more
stable pricing environment. Overall, our UK residential
operations generated revenues of £764.4m (2006:
305.6m) and contribution of £50.2m (2006: £24.3m).
Our UK business-to-business operations, under the
Opal brand, enjoyed a year of good growth. Reported
profitability does not fully reflect the underlying trend as
we continued to allocate all our telecoms engineering
headcount to the Opal business, although the
economic benefit is shared with the residential
operations. From the current year, we will allocate
these costs on a more equitable basis. UK business-
to-business revenues were up 23.1% to £319.9m
(2006: £259.9m) and contribution rose 11.1% to
£31.2m (2006: £28.0m).
During the year, we acquired Alto Hiway, a small
business focused ISP. In combination with Rednet,
a business ISP acquired with Onetel, this will provide
the platform for the launch of a range of data products
into Opal’s core market, as Opal seeks to extend its
product offering outside its historical focus on value-
added voice services. The platform of unbundled
exchanges supporting the residential strategy is a
potentially highly valuable asset in the SME space.
Non-UK Fixed Line revenues were up 10.4% to
£111.6m (2006: £101.1m) and contribution down
12.9% to £7.6m (2006: £8.7m). From the year to
March 2008 we will be reporting these operations,
and our Mobile businesses, within the Distribution
division, since for the most part their value lies in
our ability to recruit customers through the store
base, rather than in network infrastructure.
Mobile
Total Mobile revenues were up 9.8% to £504.8m
(2006: £459.8m), and contribution rose 24.0% to
£60.0m (2006: £48.4m). The Phone House Telecom,
our German mobile service provision business, saw
contribution rise 5.8% to £52.7m (2006: £49.8m)
on revenues of £363.2m (2006: £337.4m). After the
amortisation charge for subscriber acquisition costs, net
contribution was up 15.8% to £21.9m (2006: £18.9m).
The operating environment in Germany continued
to benefit our model, with networks demonstrating
a consistent appetite for high quality subscription
We made a further major strategic move during the
year with the acquisition of AOL’s internet customer
base in the UK. This immediately made us the number
three player in the UK broadband market and gave us
the requisite scale to ensure a healthy payback on our
infrastructure investment. The acquisition also gives
us two differentiated products in the market, thus
increasing our potential addressable market. We
ended the year with 2.27m broadband customers,
equivalent to approximately 16% of the UK market.
During the year we started migrating customers from
BT’s network to our own unbundled lines, a process
carried out by BT Openreach’s engineers. This
operation is fundamental to the overall profitability of
our residential business as it significantly reduces unit
operating costs. Initially, progress was slow and the
high number of errors resulted in a very poor customer
experience. However, towards the year end we saw
a significant improvement in the reliability of the
service, which led to a rapid acceleration in migration
rates. As at March 2007 we had more than 700,000
customers, or over 30% of our broadband base, on
our own unbundled network.
UK Customers
2007 2006
000s 000s
Broadband
AOL 1,535 –
TalkTalk Free 655 –
TalkTalk Existing 81 168
Total 2,271 168
Of which unbundled
AOL 327 –
TalkTalk 375 –
Total 702 –
Voice
AOL 125 –
TalkTalk Free 740 –
TalkTalk Existing 1,860 2,570
Total 2,725 2,570
As planned, our base of voice-only customers,
serviced via Carrier Pre-Select (“CPS”), declined during
the year, as we migrated customers onto our bundled
broadband products. We started the year with 2.57m
voice-only customers and by March 2007 this figure
13
Business Review Governance Financial Statements
www.cpwplc.com
Strong growth across
all Mobile bases
(000s)
811
989
1,593
1,980
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