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Carphone Warehouse coffers hit by broadband rollout

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Carphone Warehouse's faltering entry into the broadband dogfight cost the firm 10 per cent of its profits compared to last year, the company said this morning.

Overall pre-tax profit tumbled 9.5 per cent to £123.1m. Group revenue for the financial year rose to £3.99bn, from £3.05bn a year ago.

In the 12 months to 31 March, its often criticised TalkTalk "free" broadband venture has burned through £72m, on top of the £370m it coughed for AOL's customer base. On average, the 655,000 customers for "free" broadband pay Carphone £28 per month.

It blamed the loss from broadband on an emergency investment in customer service bodies and difficulties with its local loop unbundling programme.

CEO Charles Dunstone said: "The success of our unbundling strategy has encouraged us to broaden our exchange footprint for both TalkTalk and AOL customers...we expect the level of investment to fall materially in the following financial year once our exchange build-out is completed."

Carphone has admitted its unbundling program has struggled to keep pace with demand for the service, leaving subscribers marooned by delays and technical cockups. Today, the firm reiterated its view that it now has the beast under control.

Dunstone said: "The customer service issues which arose from the unprecedented response to our Free Broadband offer have now substantially been addressed. We are now provisioning over 80 per cent of new customers directly onto unbundled lines, which simplifies the process and reduces waiting times to no more than three weeks from sign-up."

It now has 2.72 million broadband punters across TalkTalk and AOL, ranking it third overall with about 16 per cent of the total UK market. At the end of March, 700,000 had been unbundled, which is key for Carphone's "free" economics to work.

The firm has no plans to integrate AOL with the rest of its broadband base, and will continue to pitch the former Time Warner brand at novices, even lower in the market than TalkTalk, customer and channel development director Chris Collinson told us earlier this year.

Carphone's results statement is here. ®

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