Dunstone bundles into broadband
(Filed: 31/10/2004)
Carphone Warehouse has already signed up 650,000 customers for its
fixed-line service. Now it wants to sell them high-speed internet
access, writes Guy Dennis
Carphone Warehouse will tomorrow launch a broadband internet service,
offering customers cut-price high-speed access to the web, in the
latest bid by the group to undercut rivals.
The launch of the service, which will be announced when the company
issues its first-half results, comes after the mobile phone retailer
launched TalkTalk, a landline telephone service created to undercut
BT.
Carphone Warehouse is the latest company to enter the increasingly
competitive broadband market. Like its rivals, it is aiming to exploit
trends that are transforming the way both customers and businesses use
the lengths of copper wire that link our homes to telephone exchanges.
These trends include the growth of high-speed broadband internet with
its implications for the way we buy products from music to movies, the
bundling together of internet services with conventional telephone
services, and the entry of retailers into the telecoms industry.
For Carphone Warehouse in particular, it marks another step in its
move from mobile phone shop chain to broader telecoms services
retailer, which blossomed with its launch of the TalkTalk telephone
service in February 2003. The service has moved into profit in the
past two months, now has more than 650,000 customers and is being
rolled out in France, Spain and Germany.
TalkTalk Broadband will offer customers high-speed internet access for
as little as £19.99 a month, making it one of the cheapest services on
offer. It will also give customers the ability to download an
unlimited amount of music, movies and other products.
In contrast, some rival broadband services place limits on the amount
of digital services which can be downloaded while others such as
Virgin, which charges just £17.99 for a basic service, add extra fees
if usage limits are breached.
Carphone Warehouse, which is led by Charles Dunstone, the chief
executive, will bundle TalkTalk Broadband services with its fixed line
telephone package, which offers free weekend and evening calls.
About 4m of Britain's 25m households currently have broadband internet
access, with this number growing rapidly. BT, the telecoms company,
recently revealed that it connected 472,000 broadband users in the
three months to the end of June.
While the overall industry growth rate is likely to rise as more
providers offer cheaper services and set up their marketing campaigns,
many analysts predict the market is set for a fierce price war. Last
month, BT announced it was cutting its entry-level broadband service
from £19.99 a month to £17.99 a month.
But all this still leaves a fundmental question unanswered: why does
Carphone Warehouse, a company that made its name flogging mobile
telephones from high-street shops, think it can jump into the internet
industry and beat giants like BT and AOL, the US-based internet
provider?
The main reason why Dunstone is optimistic is the success of the
TalkTalk telephone service. On the one hand, it has shown that the
company can make money from telecoms, and win customers from BT.
Although Dunstone will not give precise figures for TalkTalk's
profits, he says: "We just reached the point in September where the
money we were making on existing customers was more than the money we
were investing in new customers. It's a tipping point."
But the success of TalkTalk also provides a platform from which to
offer broadband, which Dunstone talks of as a natural next step.
"Given the brand we've established with TalkTalk, and we can see a
huge percentage of TalkTalk customers are using broadband or dial-up
internet, even within our existing customer base, there's already a
strong market," he says.
"At least half of them [TalkTalk customers] are accessing the internet
in one form or another. What we don't want is a lot of customers in
different silos buying one product from us. What we want to build over
time is [a market of] people that get everything they need from us."
Dunstone argues that bundling services should allow the company to be
more effective at marketing and to undercut rivals that offer separate
broadband and internet services.
But it will also be interesting to see if other retailers follow
Dunstone's lead. Tesco, the supermarket chain, already offers both
broadband and telephone services. Though it does not offer them as a
combined package, analysts argue it could easily make the switch.
Carphone Warehouse
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