Acquisition

Carphone Warehouse Group PLC
08 March 2004


8 March 2004
Embargoed until 0700 hours


The Carphone Warehouse Group PLC ('The Carphone Warehouse')

Acquisition of Xtra Telecom SA ('Xtra')

  • The Carphone Warehouse enters the Spanish fixed line market
  • Acquisition of Xtra Telecom, a Spanish alternative fixed line telecom
    provider
  • Existing Xtra management to focus on SME business market
  • New residential service to be launched via Phone House stores
  • Earnings neutral in the year to March 2005

The Carphone Warehouse announces that it has entered into agreements to acquire
the entire issued share capital of Xtra for a cash consideration of €11.5m
payable in instalments over the next two years.  Further potential cash
consideration of up to €12.2m will be payable over the next two years subject to
the achievement by Xtra of specified EBITDA targets.

Xtra is an alternative telecoms carrier with national coverage in Spain.  It has
three switches and low cost, leased infrastructure with a high level of
interconnect into the Telefonica network. It is currently carrying approximately
45 million minutes of traffic per month for business and wholesale customers and
the international pre-pay market.  In the year to December 2003 Xtra generated
unaudited turnover of €34.9m and was marginally profitable at the EBITDA level.
Net liabilities acquired were approximately €1.0m.  It is anticipated that the
acquisition will be earnings neutral in the year to March 2005, after taking
into account the expected start-up losses from the residential service.

The acquisition provides The Carphone Warehouse with a sound platform for its
entry into the Spanish fixed line market.  The existing Xtra sales team will
continue to pursue new business wins in the SME market and will benefit in the
medium term from the expertise and product portfolio of Opal.  In addition, The
Phone House will be launching a residential fixed line service in Spain using
the Xtra network within the next six months.  As The Carphone Warehouse has
demonstrated in the UK with the successful launch of talktalkTM, the
combination of low cost customer acquisition through a store chain and the
margin benefits of owning certain elements of network infrastructure creates an
attractive opportunity in the residential fixed line market.

Commenting on the acquisition, Charles Dunstone, Chief Executive Officer of The
Carphone Warehouse, said:

'With the deregulation of the European telecoms market, carrier pre-select
services offering business and residential customers a seamless and lower cost
alternative to incumbent telcos are becoming a natural and growing trend.  We
see opportunities to enter this market in a number of countries where we already
have well-established operations, replicating and adapting the successful model
we have developed in the UK with Opal and talktalk.  The Spanish market is
particularly attractive as our first fixed line step abroad, because of the
critical mass and momentum of our retail business and the relatively high market
share of the incumbent provider.

'Xtra is a well-managed business with a low cost culture that can make further
progress in the small business market, and that, combined with the strength of
our Spanish retail operations, enables us to create what we believe will be a
compelling proposition in the residential market.'

Luis Camarena, CEO of Xtra, said:

'We are very pleased to become part of the Carphone Warehouse group.  We are
excited about the prospects both for our existing business and for the
residential offering.  Carrier pre-select is a growing feature of the Spanish
market, with customers in both the business and residential sectors increasingly
aware of the savings they can make.  Combining the retail presence of The Phone
House and the expertise of Opal with our existing business gives us an excellent
opportunity for growth. This is a great deal for customers and employees alike.'



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Notes to Editors

The Phone House Spain

The Phone House opened its first store in Spain in 1997 and has grown rapidly
since then.  The business has a portfolio of 166 stores, with 33 stores opened
in 2003 and significant further expansion planned for 2004.  The geographical
focus of the business is in Madrid, Barcelona and Valencia, which account for
approximately 50% of the chain.  In the nine months to December 2003, The Phone
House Spain generated revenues of €103.7m, representing year-on-year growth of
52%.  The business employs 800 people.

Spanish fixed line telephony market

The market for fixed line telephony in Spain is worth €6.2bn, of which €4.2bn
relates to call revenues and €2.0bn to line rental and connection charges.
Total minutes of use were approximately 128bn in 2003.   There are 19.3m access
lines.

The business market is worth €2.5bn in revenue terms, with the SME market
representing about two-thirds of this figure.  The residential market is worth
€3.7bn, of which €2.2bn relates to call revenue and €1.5bn to line rental and
connection charges.  There are 14.7m residential access lines. (Source: IDC,
October 2003).

At the end of 2003 the incumbent fixed line operator had a 77% market share of
fixed line voice traffic and a market share of approximately 87% of lines.

Local CPS was introduced in Spain in January 2001, and as at December 2003 there
were 2.3m CPS lines, an increase of 28% over December 2002.  CPS lines represent
approximately 12% of total lines in the Spanish market.


                      This information is provided by RNS
            The company news service from the London Stock Exchange            DSEEELEFE