Carphone Warehouse (UK)


Until its merger with Dixons in 2014, Carphone Warehouse was Europe's leading specialist retailer of mobile phones and services, with a little over 2,000 stores in seven countries, operating as either Carphone Warehouse or Phone House. It underwent a series of transformational changes in its comparatively short life as an independent company, expanding rapidly during the early 2000s, and developing telephone and broadband services in several of its major markets. In the UK in particular it became a significant rival to local leader BT. As a result, the company was split in two in several stages between 2008 and 2010. The retail operations of Carphone Warehouse were transferred into a newly created but ultimately ill-fated joint venture co-owned by US electronics giant Best Buy. The telecoms and broadband operations subsequently demerged in 2010 as Talk Talk Group. In another major overhaul in 2013, Best Buy withdrew from the Carphone Warehouse joint venture, selling its shares back to its British partner. A year later, Carphone agreed terms for a merger with consumer electronics retailer Dixons to create Dixons Carphone.

Originally a simple retailer of mobile phones in the UK, the company steadily evolved into a broad supplier of services across Europe. It was an impressive personal achievement on the part of founder Charles Dunstone. UK trade paper Campaign called Carphone Warehouse "arguably the UK's greatest business success" of the 1990s, and Dunstone "its most spectacular entrepreneur". He was knighted as Sir Charles Dunstone for services to industry in 2012.

Charles Dunstone was just 25 when he launched The Carphone Warehouse with old school friend David Ross, selling what were then called carphones - the precursor to today's wireless handsets - from the London flat they shared. Despite the rapid evolution of the mobile industry during the 1990s, Dunstone refused to change the group's increasingly old-fashioned name. Instead he embarked on a slow but steady expansion of the business. It launched an insurance scheme to cover phone loss and theft in 1994, and expanded beyond the UK later that decade. In 1996, CPW opened its first stores in Ireland and in France (as The Phone House), followed by Spain a year later, and Sweden and the Netherlands in 1998. Key acquisitions in 1999 included the UK operations of American electronics retailer Tandy and 45 standalone mobile stores in France from FNAC. Following an IPO in 2000, Carphone Warehouse's business was further strengthened with the acquisition in 2001 of Cellcom and CMC, two linked customer relationship management companies with operations in the UK and France respectively. 

After several years in which it marketed itself almost exclusively on the radio, Carphone appointed Y&R to handle its first major TV campaign in September 1999, but the account was dropped just a week later in the light of the planned merger of Y&R with RKC&R, which handled rival Virgin Mobile. The business was picked up by TBWA\London, where Carphone founder Charles Dunstone established a close friendship with that agency's then-managing director Johnny Hornby and CEO Simon Clemmow. As a result, when Hornby and Clemmow broke away mid-2001 to set up their own agency, now CHI & Partners, Carphone Warehouse followed as their founding client. The account has remained at CHI ever since, and has served as a platform for the agency to develop into other areas, not least media planning and buying. For several years, TCW also sponsored reality TV series Big Brother, under either the Carphone Warehouse or Talk Talk banners. It ended that relationship in January 2007 after participants in the show were accused of racism towards actress Shilpa Shetty, and instead forged links with talent series The X Factor.

Further acquisitions followed, including UK business telecoms provider Opal Telecom in 2002 and the German MVNO subsidiary of Hutchison Telecommunications (later rebranded as The Phone House) in 2003. Opal also provided the platform for the launch of residential service Talk Talk a year later, supported by an alliance with Sainsbury's to offer phone services to that supermarket's customers. In 2005 the group doubled its market share in the UK by acquiring the business and customers of both One.tel and Tele2, and introduced a broadband service a year later. However the rollout of a national broadband service got off to a disastrous start in Spring 2006, when the company was overwhelmed by demand for what it had promoted as "free" internet connections. Later that year, it strengthened its over-stretched resources by acquiring the internet access operations of AOL UK for £370m. However that purchase spooked core client Vodafone, which was also moving heavily into broadband services. The mobile services giant pulled all of its business from Carphone Warehouse, placing it instead with retail rival Phones4u. That relationship was patched up a year later, when the two companies joined forces to launch the Talk Mobile service. Vodafone finally returned to Carphone Warehouse retail outlets in summer 2009.

Also in 2006, the group initiated a bold new partnership with US retail giant Best Buy. Under this arrangement, CPW launched the jointly owned Best Buy Mobile retail format in the US, opening instore counters within existing Best Buy outlets. That format was rolled out to all Best Buy outlets by the end of 2008. In return, the group acquired European rights to offer Best Buy's Geek Squad support and service brand via its own outlets. 

The relationship expanded significantly in 2008 with the agreement to sell a 50% shareholding in CPW's European retail network to Best Buy for £1.1bn. All existing retail outlets were transferred into a newly created joint venture company. Although the original retail business continued to operate successfully, the decision to open a series of large warehouse-style "big box" stores in the UK under the Best Buy name was flawed. These fared poorly and were shuttered in 2011. That same year, Best Buy bought out Carphone's stake in the US Best Buy Mobile concessions counters for for $1.3bn (or £838m). The partners said instead that they would concentrate on new outlets in emerging markets. However there were no further developments, and Best Buy's own domestic troubles further weakened the partnership. In April 2013 Best Buy agreed to sell its 50% holding in CPW Europe back to Carphone Warehouse plc for £471m.

At the same time, Carphone began pruning its presence in continental Europe, converting several outlets to joint ventures with local retailers. The poorly performing French Phone House retail network was marked for closure in 2014. Separately, the group also sought a buyer for its 46% stake in Virgin Mobile France, a joint venture with Virgin Group (also with 46%) and the management team. Following the acquisition of the local operations of Tele2 in 2009 it had became France's 4th largest operator - and largest MVNO "virtual" operator - with 1.71m customers at March 2013. Calls are directed through the Orange network. The business was acquired by French cable group Numericable (now SFR).

The largest proportion of Carphone Warehouse's revenues was derived from the sale of new mobile connections, in the form of new mobile contracts or pre-pay handsets. However, connection volumes slipped steadily from a high of 12.5m new connections to customers in 2009 to 9.8m in year ending 2012. For the year to March 2014, Carphone Warehouse reported proforma headline revenues of £3.28bn, down 2% on a comparable basis, and pretax profits of £133m. Statutory revenues excluding the proportion of CPW accruing to Best Buy were £2.58bn, with pretax profit of £67m.

In May 2014, the group confirmed plans to merge its remaining operations with rival Dixons Retail to create a UK champion in electronics retail. That deal was approved by regulators and completed in the final quarter of 2014.

Last full revision 19th July 2016


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