Carphone Dials Up Rivals

Carphone Warehouse Group plc (London: CPW) cemented its position as a major rival to BT Group plc (NYSE: BT; London: BTA) and merging cable operators ntl group ltd. (Nasdaq: NTLI) and Telewest Global Inc. (Nasdaq: TWSTY) in the U.K. voice market today with two acquisitions.

It bought One.Tel from owner Centrica plc for £132 million (US$233 million) and the U.K. and Ireland business of Tele2 AB (Nasdaq: TLTO) for £8.5 million ($15 million). Both companies resell BT voice lines to U.K. residential users. (See Carphone Buys Tele2 UK and Carphone Buys Onetel.)

Centrica had been looking for a buyer for some months (See Eurobites: Exit Strategies.)

One.Tel has 1.35 million traditional voice customers, 60,000 broadband users, and 40,000 mobile customers. Tele2 UK has 188,000 residential voice line customers in the U.K. and 36,000 in Ireland, where it resells eir voice connections.

Adding these to Carphone's existing customer base gives it 2.4 million fixed-line voice customers and more than 2.5 million mobile connections. It also gives it a foothold in the broadband market, where it has plans to significantly ramp up its activities by unbundling the local loop and installing its own DSL equipment in up to 1,000 BT local exchanges during the coming three years. (See Carphone Reports Half Year.)

Carphone's CEO, Charles Dunstone, told the BBC this morning that he plans to compete with BT head on with the bigger customer base and the chance to upsell broadband in the coming years. In a research note published this morning, Ovum Ltd. analyst Mike Cansfield writes that "at first glance the suggestion can be dismissed as mere bravado. However, this is not as outlandishly optimistic as it may seem. Carphone Warehouse is strong in the high street, where (as we know from consumer mobile) customers are prepared to buy telecoms services. In contrast, BT is weak in this area. If Carphone Warehouse can leverage this strength and play on BT's weakness, the idea is not as fanciful as it seems."

Investors appear to agree. Today's news sent Carphone's share price up by 16.5 pence, nearly 7 percent, to 256.5 pence on the London Stock Exchange .

— Ray Le Maistre, International News Editor, Light Reading

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