Carphone Warehouse 2012 Annual Report Download - page 14

Carphone Warehouse Group plc Annual Report 201210
ADAPTING TO AN EVOLVING MARKET
MTR CUTS
Regulatory cuts in mobile termination rates (“MTR”) during the
year resulted in network operators reducing the level of subsidy on
prepay handsets, causing a drop of 30–40% in prepay connections
in some markets. Further MTR cuts are scheduled through to 2015
and will continue to affect the opportunity of network operators to
invest in the customer proposition.
Against this, higher and higher quality devices are coming to market
at affordable prices and we remain optimistic that this canbe used
to drive further smartphone penetration into theprepay segment.
ECONOMIC ENVIRONMENT
The economic environment is challenging for all retailers,
withconsumer spending subdued and fierce competition online
andonthe high street.
This has a direct impact through our sales channels, with some
discretionary spend inevitably deferred, and on our income from
thenetwork operators, which forms the majority of our revenues.
The European networks operate in a highly competitive environment,
and have reported pressure on ARPUs, particularly in the second half
of last year, dueto MTR cuts and reduced customer spending beyond
the minimum commitment. Our strategic and economic interests
are aligned withthe network operators through revenue share
arrangements, andsuch ARPU pressures therefore affect
ourrevenues.
Downward pressure on ARPUs is being offset by increasing
datausage, which may increase as the penetration of high‑end
smartphones into the postpay market increases and smartphones
move more fully into the prepay segment.
MARKETPLACE
SMARTPHONES
Smartphones have revolutionised the way we use our mobile
phones. E‑mail, internet access and applications mean that
thedevices are about far more than making and receiving calls
andthey are becoming a much larger part ofour everyday lives.
We continue to see an exciting array of smartphones coming to
market with ever increasing functionality. With fierce competition
between both manufacturers and operating system providers
theindustry is continuously evolving as each provider seeks to
differentiate itself. We are perfectly placed to take advantage of this
competition as we are able to provide the independent advice that
consumers need on which device is right for them.
NON‑CELLULAR
Our business model has evolved over recent years towards
abroader range of products associated with the Connected World.
While non‑cellular sales are still a very small part of our overall
revenues, they provide an exciting opportunity for further revenue
growth. Tablets have been a revolutionary innovation in the market,
providing another way for people to get online whether at home
oron‑the‑go. With a wide range of devices to choose from, and
different options for connecting, our impartial and expert advisors
are well‑placed to help customers make their decisions.
With the functionality of smartphones and tablets developing
allthetime, the range of complementary products also continues
toexpand. Alongside traditional mobile accessories, such as protective
screens and cases, we now cover wireless music systems, speakers
and headphones. Additionally, there is an increasing proliferation
ofapp‑cessories, accessories for smartphones andtablets that
enhance the performance of applications, which arebeing sold
through dedicated app‑cessories sections within anumber
ofstores and through our online channels.
CPW EUROPE