New Owner of AOL UK is Dumped by Vodafone

16 October 2006

LONDON: Vodafone, the globe's largest cellphone network company, announced late last week it is to transfer its exclusive UK third-party high street retail contract from Europe's biggest cellphone retailer Carphone Warehouse Group to rival chain Phones4U - news that triggered an overnight dive of more than 16% in CWG's stock price.

With the wisdom of hindsight, future historians might opine that the first hairline crack in CWG's hitherto impregnable structure was its metamorphosis last year into a fully fledged UK telco via the acquisition of lossmaking OneTel [WARC News: 21-Dec-05].

And in particular the problems sparked by its subsequent marketing of 'free' broadband internet access . Losses in CWG's current fiscal accruing from that offering are predicted to total £70 million ($129.9m; €103.9m).

Some chroniclers also believe the crack widened further last week with CWG's acquisition of AOL UK, whose declining performance has given cause for concern [WARC News: 12-Oct-06].

And although neither event has yet proved a step on the road to perdition, the bodly blow delivered by Vodafone will do nothing to restore confidence in the group's future.

According to the Financial Times, Vodafone-buyers account for around 20% of CWG's customer base, and analysts expect the move to deprive the company of more than 350,000 buyers.

However, in a statement to investors, CWG claimed: " We do not expect there to be any impact on market forecasts for this or future years as a result of this change in commercial arrangements."

The group confirmed its forecast pre-tax profit for the year ending March 31 2007 remains at £120m.

Data sourced from Financial Times Online; additional content by WARC staff