Dunstone’s biggest deal launches Carphone into Wireless World

Dunstone’s biggest deal launches Carphone into Wireless World

The new venture

Carphone Warehouse’s £1.1bn deal with Best Buy will lead to a radical restructure: the retail business (including the 800 stores, telesales, insurance, online, trade-ins and Hugh Symons indirect distribution) has been put into a new group. And that group will be propelled into a new world of electrical retailing far beyond its traditional arena of mobile telecoms. 

That new group is owned 50-50 between the two parties, and Best Buy has paid £1.1bn to be part of it.

Mobile can reveal taht the plan is to open 200 large-scale stores which sell a variety of electrical goods. The first stores will open at the start of 2009 under the Best Buy ‘Big Box’ brand. They will be around 30,000 square feet and appear in retail parks across the country to compete head-to-head with Currys, Comet, John Lewis and Tesco.

The six-man management team of the new venture will be chaired by Bob Willett, Best Buy International’s CEO. Roger Taylor, Carphone Warehouse Group’s CFO, will become the company’s new CEO. Andrew Harrison will sit alongside Taylor on the management committee, along with two other members of the Best Buy board.

Charles Dunstone, CEO of Carphone Warehouse, will also sit on the board of executives for the new venture.

Big Box stores are expected to sell everything from toasters to plasma TVs and washing machines, but will enter an area that has been tough for retailers. Powerhouse, Tandy and Rumbelows, have come and gone over the past decade.

DSG, parent company of PC World and Currys, issued a warning earlier this year, saying its profits are likely to be £40-£50m lower than expected. It made 400 HQ staff redundant this week.

Harrison says: ‘If you look at Best Buy’s business model, it is entirely different to what we have from big electronics retailers like DSGÉ shopping is a leisure activity in the UK and no-one has really tapped into that. The big difference [between DSG and Best Buy] is that the emphasis is on the people. Dixons will focus on products, and Best Buy will focus on people and customer experience.’

Broadband

The use of the £1.1bn cash injection reveals the direction Carphone founder Dunstone looks to for future growth. He wants to clear the debts accrued by Carphone in building its telecoms business, but the cash will also go into further acquisitions to give TalkTalk/AOL more firepower in the broadband market.

Dunstone has already spent heavily on contact centres in Preston, unbundling the exchanges and buying AOL.

Carphone is now rumoured to be eyeing Italian internet service provider Tiscali. Carphone refuses to confirm it has any plans to purchase Tiscali, but a spokesman for the company says it isn’t ruling it out.

The purchase would make Carphone one of the most powerful broadband players in the UK market, taking its market share level with the current leader, BT. This would leave both Carphone and BT with around one third of the market. However, Tiscali may want to sell the whole business, not just the UK part, which is the part Carphone is interested in.

Exit strategy

Dunstone says he’s not going anywhere, but with Best Buy’s 50% ownership of the business, and Taylor now installed as CEO, it makes it far easier for
Dunstone to pull away from the retail operation.The £1.1bn investment values the retail business at £2bn. When you consider that John Caudwell sold

Phones 4u to Providence Equity Partners for around £600m (without considering the cash in the business) two years ago, the Carphone valuation seems appropriate given Phones 4u had less than half the number of Carphone’s stores, and it was sold at the top of the market.

Written by Mobile Today
Mobile Today

Comments

Please wait...


Please write code to prove you're human