Carphone Warehouse has predicted that a series of sub-£100 smartphones will help reinvigorate the ‘very weak’ prepay sector in the run-up to Christmas.
The retailer said there was an ‘exciting’ range of seasonal smartphones and tablets on offer this Christmas but was confident of the pay-as-you-go market recovering, thanks to aggressively priced entry-level handsets. The prepay market, traditionally a stronghold of the high street retailer, has been declining for several years. While Carphone Warehouse admitted during a presentation to analysts that the market remains ‘very weak’, it said there was a strong and broad product pipeline of smartphones under £100.
Carphone said it is running a series of weekly promotions between now and Christmas on prepay handsets. Carphone Warehouse Group CEO Roger Taylor (pictured) said: ‘I think the smartphones will have a bit of an uptick this year. I sense from some of the research we do that smartphones could be back on the Christmas stocking list.’
The retailer said it was also growing its market share in contract through its weekly Smart Deals offer. It has done this by snapping up first-time smartphone users by offering low-end contract deals, such as the BlackBerry Curve 9320 on a £10.50 per month contract.
At the high end of the contract market, Carphone Warehouse said flashier handsets were leading to higher average revenue per user. It said consumers were excited by devices including the Apple iPhone 5, Samsung Galaxy S III and Galaxy Note II, Nokia’s Lumia 820 and the Windows Phone 8S by HTC. It said it was also expecting a boost to ARPU from more data-centric 4G tariffs.
Carphone Warehouse Group is currently restructuring into a more autonomous organisation to focus on its core business. It said this will help it to save up to £25m per year. Taylor also told analysts it could buy Best Buy out of its European joint venture. The joint venture includes all of Carphone’s stores in the UK and Europe. Analysts have estimated that the share could be bought for £550m, half the price that Best Buy paid for it from Carphone Warehouse founder Charles Dunstone in 2008.
Taylor said: ‘If [the joint venture] was sensible value, I would be very surprised if the board and shareholders didn’t want to take it. It is not like buying something where there in an inherent risk. It’s already our business.’
Carphone Warehouse Group’s results for the six months to 30 September exceeded predictions, reporting a profit of £12.5m. The UK fared particularly well, with like-for-like sales up 5% across the half year and up 10% during its second quarter.
Editor: Graeme Neill