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Carphone ups profit target

CARPHONE Warehouse yesterday upped its full-year forecasts for the second time in a matter of months after strong trading at both its retail and broadband arms during the third quarter.
The FTSE 250 group, which is splitting into two businesses in March, says earnings per share to the end of March are likely to be at the top end of the existing 14p to 15p range up from 12.6p a year ago.

Its telecoms business TalkTalk reported a 29 per cent jump in total revenue to £446m for the three months to 31 December.

The division added a further 36,000 customers during the three months to 31 December, slightly above analyst expectations.

It now expects to have between 4.1m and 4.2m broadband customers by year-end.

Carphone said growth within its Talk Talk brand, which officially sponsers the X-Factor, is offsetting falling numbers of former Tiscali customersfollowing the acquisition of its Italian rival in July 2009.
Europe’s biggest mobile phone retailer also saw a 5.5 per cent rise in like-for-like revenues at its joint retail venture with US giant Best Buy.

Talk Talk has X-Factor
CARPHONE Warehouse, the sponsor of X-Factor, appears to be doing well in a talent contest of its own. Talk Talk, the broadband arm of the business, added 36,000 new subscribers in the third quarter, helping push full-year revenues to the top end of consensus at £446m – a 29 per cent increase. It picked up most of these customers by buying Tiscali in a fire sale.

The business is also reaping the benefits of building its own network through a process known as unbundling, instead of buying wholesale capacity from BT. That has helped it push industry prices down while increasing the average amount of revenue it gets from each of its 4.15m customers to £23.80 per quarter.

Trading at its Best Buy Europe joint venture was strong, with the arm expected to contribute full-year net income of £40m-£45m, against earlier guidance of £30m-£40m.

With the de-merger of Talk Talk planned to complete by the end of March, investors will soon have shares in two firms, a telecoms company and a retailer. The telecoms arm is sure to attract takeover interest from Sky and BT. But investors should think twice about keeping their shares in the standalone retailer. The outlook for consumer electronics in 2010 doesn’t look strong.
david.crow@cityam.com