Carphone Warehouse mulls £1bn bid for AOL's UK operation

by Joanne Oatts and Alex Donohue, Brand Republic 07-Jun-06, 08:50

LONDON - Carphone Warehouse is to consider a £1bn bid for the AOL UK business, despite the mobile phone company releasing figures yesterday that showed a 12% fall in profits to £81m.

The bid by Carphone Warehouse, which is on the brink of entering the FTSE 100 index for the first time, came as it revealed it has attracted 340,000 subscribers to its Talktalk free broadband service, which it launched in April.

It is understood that chief executive Charles Dunstone will be keeping a close eye on Time Warner's sale of AOL, which has 2.2m customers, and is likely to attract a ferocious bidding war once the sale gets under way.

A successful bid for AOL, which Time Warner was said to be considering selling last week, would allow Dunstone to combine the two businesses and create a new internet powerhouse in the UK.

AOL is the UK's third largest internet service provider behind BT and NTL/Telewest, and the company is understood to have also attracted interest from Vodafone and O2 so far.

The latest profit figures from Carphone Warehouse reflect the acquisition and integration of One.Tel, previously own by Centrica, which was purchased in December for a reported £154.2m. Integration of the company, including redundancy and customer migration costs, is estimated at £22.3m.

Carphone Warehouse's pre-tax profits did rise 36% to £136.1m for the year ending April 1 2006.

Dunstone said: "We have exceeded expectations while making substantial cash investments in key new initiatives that will support our continued underlying growth."

Carphone Warehouse's annual sales rose by 29.4% to £3bn. The mobile phone retailer hopes to attain a 15% growth in mobile subscriptions this year.

The company is predicted to make a £50m loss on the business this year, but hopes a £40m profit can be achieved by 2008.

Of the 340,000 new customers that had signed up by June 5, 240,000 had line rental already set up and were receiving calls, and a further 100,000 had this service as well as broadband.

Dunstone said: "Twice as many people as expected applied.

"We have connected more customers in the first eight weeks than we had planned to in the first four months."

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