Broadband Turbo-Charges Carphone's Q3

U.K. competitive broadband service provider Carphone Warehouse Group plc (London: CPW) cemented its position as a long-term broadband rival to BT Group plc (NYSE: BT; London: BTA) Friday by announcing its DSL subscriber base topped 2.6 million at the end of its fiscal third quarter (December 29, 2007). (See Carphone Hits 2.6M DSL Subs.)

The company is best known for its high street stores, where it sells handsets and mobile connections for the U.K.'s main operators, including the iPhone package in partnership with Telefónica UK Ltd. . But it is now also a major ISP, having crashed the broadband party with its controversial "free" DSL offer, which attracted a further 118,000 connections during the quarter, taking its total to 2,604,000. (See iPhone Invades UK and Free Broadband Comes to the UK.)

Of that total, 1,598,000 (61 percent) are on unbundled lines connected to the operator's own DSLAMs. A year ago only 19 percent of its customers were connected to unbundled lines.

Third quarter revenues from its broadband business totaled £349 million (US $683 million), a 36 percent increase compared with a year earlier.

Carphone also said it expects to boost its broadband base by between 107,000 and 132,000 connections during the fourth quarter.

BT is still the U.K.'s broadband market leader, with more than 4 million retail broadband connections, while cable operator Virgin Media Inc. (Nasdaq: VMED) has about 3.6 million high-speed access customers. (See BT Boasts 4M DSL Subs.)

While the company did well with its fixed line business, which is to be supported by an expanded national optical network, Carphone missed its mobile connection targets, causing an initial dip in its share price early Friday morning. (See Brits Build Backbone With Infinera .)

But the company, which has been the subject of takeover talk of late, is bullish about trading conditions and says it's still on track to hit its full year financial targets, and by mid-morning investor sentiment had swung in favor of the company and its share price had risen by 10 pence, nearly 3.3 percent, to 314.75 pence. (See Carphone Leaps on M&A Talk.)

Carphone's third quarter revenues were £1.23 billion (US $2.41 billion), of which £900 million (US $1.7 billion) came from its "Distribution" (mobile resale and handsets) business.

— Ray Le Maistre, International News Editor, Light Reading

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