Acquisition

Carphone Warehouse Group PLC
19 December 2005



19 December 2005


For immediate release


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


The Carphone Warehouse to acquire Onetel


The Carphone Warehouse announces that it has exchanged contracts with Centrica
plc ('Centrica') to acquire the Onetel group of companies from Centrica, for an
initial cash consideration of £132.0m funded via an extension of existing debt
facilities.  The acquisition will complete on 31 December 2005.  £94.9m of the
consideration relates to the purchase of the residential and business
operations, and £37.1m relates to an agreement under which Centrica will recruit
a certain number of customers for Carphone Warehouse through its British Gas
operations for the next three years.


In addition, The Carphone Warehouse has agreed to pay Centrica up to a further
£22.2m over the next three years if higher British Gas customer recruitment
targets are met.


About Onetel

Onetel is one of the largest alternative telecoms providers in the UK, providing
landline calls, line rental, dial-up, broadband and mobile services to
residential and small business customers.  Onetel currently has the following
approximate residential customer numbers:


  • 1.1m carrier pre-select ('CPS');

  • 250,000 indirect access;

  • 60,000 broadband; and

  • 40,000 mobile.


In addition, there were 50,000 business CPS customers.  In the year to December
2004, revenues were £280m and the operating profit was £3.0m.  In the six months
to June 2005, revenues were £162m and the operating loss was £2.0m.  Adjusted
net liabilities at December 2004 were £77.1m, including an intercompany loan of
£114.9m, and gross assets were £155.6m.


Rationale for the acquisition

Since launching TalkTalk in 2003, The Carphone Warehouse has been the fastest
growing CPS service provider in the UK, building a customer base of 1.06m by
September 2005.


Our goal is to become the number one alternative residential telecoms provider
in the UK market.  The acquisition of Onetel propels us clearly towards that
position and gives us a substantial platform of profitable voice customers from
which to launch our drive into the broadband market in 2006.  It also allows two
major competitors to join forces in their bid to deliver improved value and
service to residential customers.


We intend to rebrand Onetel's operations as TalkTalk and to give all of Onetel's
residential customers the benefit of free on-network calls as quickly as
possible.  In tandem with the acquisition of Tele2's UK business, also announced
today, we will then have a base of approximately 2.4m TalkTalk customers all
calling each other for free.


As a fundamental part of the transaction, we have reached agreement with
Centrica to use its British Gas distribution platform as a sales channel for
TalkTalk for the next three years.  We believe that this significantly enhances
the value of the transaction for The Carphone Warehouse as it gives us access to
a substantial new source of potential customers through a well-recognised and
successful channel.


Onetel's 50,000 SME customers, and its broadband and data services expertise
acquired through its acquisition of Rednet earlier this year, will be integrated
into Opal's existing business operations, in line with Opal's strategy of
consolidating the business reseller market and progressing its data offering.


Financial impact

The initial cash consideration for the acquisition is £132.0m, of which
approximately £114m will be used to pay off an intercompany balance.  £94.9m of
the consideration relates to the acquisition of the Onetel companies.  Of the
remaining £37.1m, £10.1m is a fixed sum that relates to the agreement under
which Centrica will recruit customers for Carphone Warehouse through its British
Gas operations for the next three years, and £27.0m is a variable sum dependent
on the number of customers recruited through this channel.


In addition, The Carphone Warehouse has agreed to pay Centrica up to a further
£22.2m over the next three years if higher British Gas customer recruitment
targets are met.


The transaction is due to complete on 31 December 2005 and is not subject to any
other conditions.  At this stage we anticipate that the acquisition will
increase current year pre-tax profits by approximately £4m, and next year's
pre-tax profits by approximately £20m.


For Further Information


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