Pre-Close Period Statement

Carphone Warehouse Group PLC
25 March 2002

Under Strict Embargo until 1.00pm Monday 25 March 2002


                           Pre-Close Period Statement

              Appointment of Hans Snook as Non-Executive Chairman

The Carphone Warehouse Group PLC ('the Group') is today hosting a strategy
presentation to analysts ahead of the close period prior to the announcement on
6 June 2002 of its preliminary financial results for the year ending 30 March
2002.

In addition, the Group is announcing the appointment of Hans Snook as
non-executive Chairman of the Group from 1 May this year, at which time Charles
Dunstone will relinquish the role of Chairman and retain the role of Chief
Executive of the Group.

At today's presentation, the following information will be given:

Financial Results on Track to Meet Market Expectations


Profit before tax (before goodwill amortisation and exceptional items) for the
year to 30 March 2002 is expected to be in accordance with guidance given to
analysts of £45m -£50m. The following update on trading for the period 18
January 2002 to 16 March 2002 will also be given:

  • UK connections of 339,000 compared to 358,000 last year
  • European connections of 235,000 compared to 229,000 last year
  • Group connections of 574,000 compared to 587,000 last year from 1,137
    stores

  • Subscription mix of 53% excluding SIM free, and 46% including SIM free
    handsets
  • Increase in telecoms services base to 1,035,000, comprising 165,000 own
    customers and 870,000 facilities management customers

  • Increase in insurance base to 944,000

(The above connection numbers include SIM free handset sales.)

European Re-Structuring

The Group intends to restructure certain operational and management functions in
order to maximise efficiency and secure synergies across the Group, particularly
in its Continental European operations.


The Group will continue to upgrade its store portfolio to include more arterial
routes, out-of-town retail parks and shopping centre locations and is
anticipating opening nearly 100 new stores in the coming year. The Group is at
the same time, closing 89 of its less profitable stores. The new stores are
designed particularly to appeal to subscription customers and higher value
destination retailing.

Of the above store closures, 30 are within Germany. The closure of the worst
performing stores coupled with cost rationalisation will ensure that the
performance of this operation is significantly improved. Our business in Belgium
is similarly receiving intensive management focus following its poor Q4
performance with the closure of 7 stores and with further cost savings its
performance is expected to improve.

As a result of the above there will be a one-off restructuring charge of £20m in
relation to store closures and £12m due to the operational reorganisation. In
relation to the latter, the annualised savings will be around £7m.

Other Exceptional Items

The Group today announces its intention to enter into a sale and lease back of
the Group's Support Centre in Acton, expected to generate cash in excess of £36m
and a profit of approximately £16m.

Separately, the Group expects to write down the value of its investment in a
wireless internet fund, in which it has a 71% interest, from a current book
value of £40m to £25m.

The above exceptionals are expected to generate cash of approximately £9m and
will result in a net charge to the P+L account for the year to 30 March 2002 of
approximately £31m. This coupled with the MViva reorganisation announced at our
interims and specific goodwill write off will result in a total exceptional
charge of circa £38m.

Charles Dunstone, Chief Executive Officer, The Carphone Warehouse Group PLC
said:

'The aim of our analyst presentation today will be to give a better insight into
The Carphone Warehouse - its business, culture, strategy and future.

'The mobile phone business has changed dramatically in the past 18 months and
will continue to change further. We feel very confident that mobile data will be
adopted on a significant scale, however, its introduction and adoption may take
longer than many have traditionally thought. The first really encouraging signs
are likely to be seen during 2003.

'Whilst the current market may be tough, this new environment is creating
opportunities that simply wouldn't have been available in the past. We intend to
seize these opportunities and by doing so improve the scale, quality and growth
of our profitability.

'Our business will continue to focus on two key areas. Firstly our retail
business, which continues to grow earnings in a replacement market, dominated by
voice usage, and secondly developing the recurring revenue streams, especially
telecoms services, which is an increasingly significant part of the business.
The growth in the recurring revenue streams is generated from the high value
customers introduced from the retail businesses.

'As promised we have given specific focus to our German business and as a
consequence we are closing 30 of its worst performing stores and rationalising
our operations. As such we are confident that the result for the forthcoming
year will show a significant improvement on last year.

' We have also strongly increased our focus on our telecoms services business,
where we see substantial opportunities. We are creating a business model in
which we leverage increasing value from each subscriber we recruit and become
their trusted communications supplier. We try to ensure that we have anticipated
our customers' needs and, through our comprehensive range of products and
services, build a lifetime customer relationship. This fundamentally
differentiates The Carphone Warehouse.'

Strategy Presentation

The Group's strategy is both to strengthen our position as the leading
independent retailer of mobile phones and related services and to extend the
business into telecoms services after the point of sale. This strategy is
expanding the scale of the Group's revenue and profit and is rapidly increasing
the proportion of earnings that are recurring and inherently of higher quality.

The two strands of the Group's strategy are wholly complimentary with retail
helping to feed the telecoms services business.

The European mobile market is changing rapidly. High mobile penetration levels
are leading network operators to focus increasingly on more selective targeting
of higher quality new customers; on strategies to build the loyalty, usage and
lifetime customer value of existing customers; and on the progressive rollout of
21/2G and then 3G services.

Consequences of this changing marketplace include a swing from prepay towards
subscription connections; an increasing dominance of replacement/upgrade sales
as opposed to new customer connections; and a growing need to provide high
quality customer care and service, both at and after point of sale to ensure the
right choice of phone and to ensure customers benefit from the increasing
capabilities and capacity of their phone.

The Carphone Warehouse is increasingly strongly positioned in this changing
market.

Whilst the total margin on subscription phone sales is substantially greater
than on prepay sales, a number of mobile retailers have historically focussed
heavily on prepay phones. In the new market environment, the market dropped
particularly in prepay sales and the increasing need for customer advice and
care are leading to a contraction of mobile phone outlets. A number of general
retailers have cut-back or ceased selling mobile phones and a number of
specialist mobile phone retailers have lost market share or, in certain cases,
ceased trading.

As demonstrated in our recent financial results and trading statements, The
Carphone Warehouse has anticipated the shift towards replacement sales and has
built our proportion of repeat customers and subscription phone sales. In
consequence, the Group's market share has increased sharply and the Group has
out-performed the market.

Part of the Group's strategy focuses on further steps to reinforce its retail
market position and improve the profitability of its retail operations across
Europe. This includes:

  • the restructuring announced today
  • continuing to invest in training, branding and service development to
    drive market share
  • selective investment in content for multi-media messaging services and
    Java applications to increase customer adoption and usage of new mobile
    services
  • driving greater efficiency in logistics, purchasing and support systems
    across the group
  • closing poor performing stores, combined with opening new stores in
    locations appealing more to higher value destination retailing

A further consequence of the changing mobile market is to open new opportunities
for which the Group is especially well placed. The Group's relationship with
network operators is both deepening and widening by providing after sales
customer services that help improve the lifetime value of subscribers. The
expansion of telecoms services is central to the Group's strategy. The opening
of a new call centre in Le Mans, France for SFR and the rate of growth of
recurring revenues are indicative of this. The Group believes that considerable
further potential exists in telecoms services and that this will continue to
strengthen the growth in scale, profitability and the quality of the Group's
earnings.

The appointment of Hans Snook as Chairman reflects the changing profile and
potential of the Group's business.


The retail and telecoms services strands of the Group's business are
inter-related and each exploits the Group's core skills:

  • knowledge of the mobile market
  • ability to attract high volume, high quality customers
  • passion for customer care
  • skills in logistics and purchasing
  • retail flair
  • commitment to motivating and developing the Group's people and brand
    values



For further information

The Carphone Warehouse Group PLC    07771 868 601

Charles Dunstone   07947 000 021

Roger Taylor

Tristia Clarke

For analyst and institutional inquiries    07801 580 090

Roger Taylor

Hugh Roberts

Citigate Dewe Rogerson   07973 611 888

Anthony Carlisle   020 7638 9571





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