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Broadband competition hits Carphone Warehouse

Intense competition in the broadband sector has lead to a slowdown in broadband uptake at Carphone.

In its latest trading statement, Carphone stated that it added 89,000 net new broadband customers, compared to 126,000 in the previous quarter.

Despite the slowdown in broadband uptake, it transferred 411,000 customers to its own unbundled broadband network, taking the total figure to 1.4 million.  Carphone currently makes a loss on any customer not connected to its own unbundled network.

It has however accelerated the transfer of customers that were using BT’s wholesale network to their own over the last few months, which increased profitability for the company and offset the slowdown in new broadband additions.

Many TalkTalk customers will be coming to the end of their 18-month contracts, and coupled with the fierce competition, Carphone may have to battle harder to keep customers.

One of its rivals, Sky, increased its broadband customer base (new and existing Sky customers) from 457,000 to 716,000 in its last quarter.

However, it’s not all doom and gloom for Carphone.  It has invested heavily in its customer service operations, and a report by Point Topic in August found that they had the highest levels of happy customers of those surveyed.  It also pointed to new market offerings, such as the partnership with Dell to offer a free laptop with an AOL broadband subscription. 

The company expects to add around 200,000-250,000 broadband customers over the second half of the year.

Manoj Solanki of SeekBroadband.com commented, “Carphone’s bundled service is no longer a unique proposition in the market.  Customers can now choose from many bundled options offering similar cost savings, from providers including Sky, Virgin and Tiscali.  There is also likely to be some increase in customer churn over the next few months as contracts start to expire 18 months on.  Those who faced long delays in service provision in the early days may be among those who start looking around at alternatives.  Its customer figures in the next quarter will give a clearer indication of how things are going and the extent of any slowdown.

“Despite the fierce competition however, its broadband and telephone products still represent good value for money.”

Charles Dunstone, Chief Executive Officer commented, “’I am very pleased with the progress we have made in our fixed line business, with visibility of future profitable growth increasing all the time.  We now have over one million TalkTalk broadband customers, while the focus in AOL has been on customer migrations and network roll-out.  As a result, over 80% of all new broadband customers are now connected directly to our own network.”