Carphone to take tablets to combat pre-pay slump

The group said connections fell by more than 16 per cent at the end of 2011 due to the weak pre-pay phone market.

The retailer estimated the pre-pay market as a whole fell by as much as 40 per cent in the UK during the three months to December 31, reflecting a reduction in subsidies from the networks and a lack of smartphones in the sector.

Following the decision last year to scrap plans for a European chain of consumer electronics megastores through its joint venture with US firm Best Buy, Carphone now plans to use existing stores to offer extended ranges of tablets, laptops, Kindles, accessories, applications and content.

Chief executive Roger Taylor said: “We can sell those in a much smaller retailing environment. You do not need a 30,000 square feet box to sell what I think is going to be interesting in consumer electronics retailing going forward.

“If I look at our stores going into Christmas, we did a very good job in post-pay mobile phones, we did a reasonable job in tablets but in the rest of the store environment we have got to get smarter in how we retail other products,” he said.

Like-for-like revenues for its core retail business were down 4.7 per cent year-on-year in the quarter, but Carphone was encouraged by post-pay sales as customers coming to the end of longer 24-month contracts renewed with newer versions of smartphones such as Apple’s iPhone 4S and Research In Motion’s BlackBerry.

It reported 15 per cent growth in non-mobile phone revenues, including tablet devices, accessories, applications and content.

Carphone recently closed the 11 ‘big box’ shops it opened in conjunction with US group Best Buy in May 2008.

With losses of £46.7m in the six months to September, the £1.1bn joint venture was forced to admit that its attempt to blend competitive prices and American-style customer service had failed to pull in UK shoppers.

It said it is able to offer “credible alternative roles” to almost everyone who wanted to remain within the business.

Its shares closed eight per cent higher, a rise of 24p to 335p, as investors expressed relief the company had stuck by guidance despite a challenging marketplace.

Keith Bowman, equity analyst at Hargreaves Lansdown, said Carphone is facing a tough set of trading conditions: “Network operators have reduced subsidies, raising the cost of smartphones, whilst aggressive contract deals via the network operators themselves remain rampant.”

Carphone believes it can differentiate itself in areas such as tablets and Kindles, although it faces stiff competition from Dixons and Kesa.