LONDON -- The Carphone Warehouse announces that it has entered into agreements to acquire the entire issued share capital of Xtra for a cash consideration of €11.5m payable in instalments over the next two years. Further potential cash consideration of up to €12.2m will be payable over the next two years subject to the achievement by Xtra of specified EBITDA targets.

Xtra is an alternative telecoms carrier with national coverage in Spain. It has three switches and low cost, leased infrastructure with a high level of interconnect into the Telefonica network. It is currently carrying approximately 45 million minutes of traffic per month for business and wholesale customers and the international pre-pay market. In the year to December 2003 Xtra generated unaudited turnover of €34.9m and was marginally profitable at the EBITDA level. Net liabilities acquired were approximately €1.0m. It is anticipated that the acquisition will be earnings neutral in the year to March 2005, after taking into account the expected start-up losses from the residential service.

The acquisition provides The Carphone Warehouse with a sound platform for its entry into the Spanish fixed line market. The existing Xtra sales team will continue to pursue new business wins in the SME market and will benefit in the medium term from the expertise and product portfolio of Opal. In addition, The Phone House will be launching a residential fixed line service in Spain using the Xtra network within the next six months. As The Carphone Warehouse has demonstrated in the UK with the successful launch of talktalk™, the combination of low cost customer acquisition through a store chain and the margin benefits of owning certain elements of network infrastructure creates an attractive opportunity in the residential fixed line market.

Commenting on the acquisition, Charles Dunstone, Chief Executive Officer of The Carphone Warehouse, said:

“With the deregulation of the European telecoms market, carrier pre-select services offering business and residential customers a seamless and lower cost alternative to incumbent telcos are becoming a natural and growing trend. We see opportunities to enter this market in a number of countries where we already have well-established operations, replicating and adapting the successful model we have developed in the UK with Opal and talktalk. The Spanish market is particularly attractive as our first fixed line step abroad, because of the critical mass and momentum of our retail business and the relatively high market share of the incumbent provider.

“Xtra is a well-managed business with a low cost culture that can make further progress in the small business market, and that, combined with the strength of our Spanish retail operations, enables us to create what we believe will be a compelling proposition in the residential market.”

Luis Camarena, CEO of Xtra, said:

“We are very pleased to become part of the Carphone Warehouse group. We are excited about the prospects both for our existing business and for the residential offering. Carrier pre-select is a growing feature of the Spanish market, with customers in both the business and residential sectors increasingly aware of the savings they can make. Combining the retail presence of The Phone House and the expertise of Opal with our existing business gives us an excellent opportunity for growth. This is a great deal for customers and employees alike.”

The Carphone Warehouse Group plc