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UPDATE 2-Carphone optimistic on pre-pay prospects
July 27, 2012 / 6:13 AM / 5 years ago

UPDATE 2-Carphone optimistic on pre-pay prospects

* Says cheaper pre-pay smartphones coming to market

* Q1 CPW underlying sales down 2 pct vs f‘cst down 5.5 pct

* Q1 Virgin Mobile France revenue up 13 pct vs f‘cst up 7 pct

* Full-year guidance maintained, shares up 4.2 percent

By James Davey

LONDON, July 27 (Reuters) - Carphone Warehouse, Europe’s biggest independent mobile phone retailer, said it was hopeful that the increasing availability of lower-priced smartphone products for the pre-pay segment will boost demand in the run-up to Christmas.

Shares in the company rose 4.2 percent on Friday after it posted a less-than-feared fall in underlying quarterly sales at its main CPW Europe business and maintained its full-year guidance.

Sales at CPW Europe stores open for more than a year fell 2 percent in its first quarter, to June 30, with total connections down 17.8 percent.

That beat analysts’ consensus forecast for a like-for-like fall of 5.5 percent, according to a company poll, and compared with a 5.5 percent decline in the fourth quarter of the 2011/12 year.

Independent retail analyst Nick Bubb said that the performance was good, given that some analysts had forecast a decline of up to 7 percent.

The outcome reflected positive like-for-like sales growth in the post-pay market, driven by robust demand for smartphone products such as Samsung’s Galaxy S3. However, this was offset by a weak pre-pay market hampered by a lack of attractively priced smartphone products in that segment.

However, Chief Executive Roger Taylor said that this situation is changing. -“I‘m quietly optimistic at this stage that the ingredients appear to be lining up for a much better prepay market this year,” he told Reuters, noting that both handset manufacturers and subsidy-providing network operators were onside.

Taylor said that pre-pay smartphones priced below 50 pounds ($78.50) to 80 pounds, from companies such as Nokia and LG, were coming to the market for the “back-to-school” season.

He said these prices “will be in the sweet spot for us starting to get smartphone penetration in the wider market”.

Though many European retailers are suffering as rising prices, meagre wages growth, government austerity measures and worries about the euro zone debt crisis hurt consumers, Carphone’s Virgin Mobile France (VMF) joint venture also exceeded expectations for first-quarter sales.

It posted revenue growth of 13 percent to 122 million euros ($150.06 million), down from 21 percent in the previous quarter but beating analysts’ consensus forecast of 7 percent.

Taylor said that VMF had “weathered the storm” of this year’s launch by Iliad of a discount mobile phone network. “We moved very quickly in terms of getting our offers aligned to the marketplace,” he said.

Carphone said that it expected the consumer environment in Europe to remain challenging. Last month the group forecast 2012/13 headline earnings before interest and tax for CPW Europe of 130-150 million pounds, flat earnings at VMF and group underlying earnings per share of between 11.5 pence and 13 pence.

Carphone Warehouse shares, which have lost more than a third of their value over the past year, were up 5.25 pence at 129.1 pence at 0918 GMT, valuing the business at 613 million pounds.

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