According to various media reports, the London, UK-based operator is expected to announce during its trading update that it will offer customers three months of free broadband access, which will cost GBP4.99 ($8.69) per month thereafter for a 1MB connection. This offer is expected to be made available to customers who sign up for TalkTalk. Other industry rumors suggest that The Carphone Warehouse will set the monthly cost of a phone line and broadband account at less than GBP10 ($17.42).
The standard cost of a basic broadband package in the UK is approximately GBP15 ($26) a month, and if this free offer proves to be true, it could well spark a price war among broadband providers.
The company refused to comment on the speculation ahead of the trading statement, other than noting the intense media speculation.
The Carphone Warehouse is in the process of going through a quiet transformation from a mobile phone retailer into a telecoms company with a retail arm. At the end of last year it signaled its intention in the fixed-line market with the GBP154.2 million ($271.8 million) acquisition of UK telecoms provider Onetel from utilities company Centrica. This acquisition added 1.1 million customers to its TalkTalk service.
It also paid GBP8.5 million ($14.9 million) for Tele2 UK Communications and Tele2 Telecommunications Services (Ireland) from Pan-European telecoms company Tele2 AB. This deal added approximately 188,000 customers in the UK and 36,000 in the Republic of Ireland, and both deals now mean that The Carphone Warehouse has roughly 10% of the UK fixed-line market, with a total UK residential base of 2.4 million customers. This places it as the third-largest telephony company in the UK after market leader BT Group and second placed NTL.
It is thought that the free broadband offer will allow The Carphone Warehouse to grab market share from rivals, despite the short-term cost implications of such a move. The company is already investing heavily in local loop unbundling and is installing its own equipment in 1,000 UK telephone exchanges. This will give it direct access to 70% of the UK population, and open up its capacity to offer a triple-play service (fixed-line, broadband, and mobile).
UK satellite broadcaster British Sky Broadcasting Group is also reportedly set to offer broadband services in the second half of this year as a result of its GBP211 million ($373 million) acquisition of UK broadband service provider Easynet Group.
The Carphone Warehouse recently announced that it was participating in a mobile joint venture in France. Its partner is Virgin Mobile France (now owned by NTL) and the virtual network operator will operate under the Virgin Mobile brand using the Orange network. It will offer both pre-pay and subscription services, and will initially be distributed from almost 1,000 points of sale, including all Carphone Warehouse and Virgin Megastores outlets.
The Carphone Warehouse and Virgin will each own and fund 48.5% of the joint venture, with management owning and funding 3%. The assets and customers of Omer Telecom, The Carphone Warehouse’s existing VNO operations in France, will be included in the joint venture.
The Carphone Warehouse already has a virtual network operator in the UK known as Fresh, which it launched in 1999. This VNO uses the mobile network on O2 (now owned by Telefonica) and its main selling points are low monthly rental charges, no contracts, credit checks or paper billing, monthly customer billing by SMS, and air-time top-up notification by SMS.
