Trading Statement

Carphone Warehouse Group PLC
11 April 2006

Tuesday 11 April 2006

For immediate release


                        The Carphone Warehouse Group PLC

  Fourth quarter trading update: full year results in line with expectations,
                     despite further significant investment

    Guidance for the year to March 2007: major expansion programme announced

The Carphone Warehouse announces its fourth quarter trading update and guidance
for the year to March 2007.  The Group has continued to perform well and we
expect to report profit before tax and earnings per share in line with
expectations, despite significant investment in new business areas.

The Group is also announcing a significant investment programme, in particular
supporting its launch of free broadband from TalkTalk.  A parallel Stock
Exchange announcement gives further detail.

Fourth quarter highlights*

  • Connections up 32.8% to 2.23m
  • Subscription connections up 22.4% to 0.89m
  • 2.6m TalkTalk UK customers, after integration of recent acquisitions
  • 66 net new stores opened, with 1,778 stores at the year end
  • 35.8% growth in Mobile customer base to 3.1m

* all connections data are reported on a like-for-like 13 week basis.  Telecoms
customer numbers are on a calendar month basis.


Guidance for the year to March 2007

Underlying businesses (excluding the impact of free broadband and Virgin Mobile
France)

  • Confident of continued strong performance
  • Opening a further 250 stores across our markets to deliver 15% connections
    growth
  • Capex budget of £115m excluding SAC
  • Dividend growth in line with underlying Group performance

New ventures

  • Launch of free TalkTalk broadband and Virgin Mobile France expected to
    generate a combined one-off operating loss (after depreciation and SAC
    amortisation) of £60m
  • £30-40m operating profit from broadband in the year to March 2008
    provisionally estimated
  • Capex budget of £50m relating to accelerated investment in Local Loop
    Unbundling
  • Targeting 3.5m residential telecoms customers by March 2009, with over 50%
    on broadband



Charles Dunstone, Chief Executive Officer, said:

'We have continued to perform very strongly, and are confident of delivering
full year results in line with market expectations, despite incurring some £12m
of start-up losses on our MVNO and broadband activities.  Prospects for our
established businesses remain good and we aim to continue to invest in our store
roll-out and customer proposition.

'Our free broadband proposition, announced today, will require significant
levels of investment in the short term.  However, the broadband market is
growing rapidly and we are well placed to become a major force within it,
leading to material value creation in the future.  Meanwhile, as a mark of our
confidence in the Group's future prospects, we intend to raise the dividend in
line with underlying earnings growth in the year to March 2007.'

Fourth quarter trading

In the fourth quarter connections grew 32.8% to 2.23m as market conditions
continued to be favourable.  Subscription connections grew 22.4% to 0.89m and
pre-pay connections (including SIM-free sales) were up by 40.8% to 1.33m.

We opened 66 net new stores during the period, taking the total across the group
to 1,778.  Of these, 140 are franchise stores.  Our insurance base was up 16.7%
year-on-year to 1.9m.

The TalkTalk UK customer base, including the Onetel and Tele2 acquisitions,
stood at 2.6m at the end of the period.  Underlying growth continued to be good,
with a net 123,000 new customers added in the last three months.  The majority
of new customers are now taking our line rental service, with a total of 722,000
customers now being billed for calls and line rental by TalkTalk.  Our TalkTalk
customer base outside the UK now stands at 341,000.  Losses from our UK
broadband operations, including the trading losses on our existing base and the
costs incurred before the launch of free broadband, will amount to approximately
£5m for the year.

Our Mobile customer base grew by 35.8% to 3.1m.  The accelerated rate of
customer acquisition by our UK MVNO businesses has led to losses of
approximately £7m for the year as we invest in building a base that has the
potential to deliver meaningful profitability in the medium term.

Exceptional items

We expect to report two exceptional items for the year to March 2006.  As part
of the integration and reorganisation of Onetel, we expect to incur exceptional
cash costs of approximately £15-20m.

In addition, our investment in local loop unbundling and a new Group-wide
billing and customer management system, due to be released in the coming year,
has led us to review the carrying value of certain existing network and IT
assets.  As a result, we have decided to write down these assets at the time of
launch by approximately £15-20m.

Outlook and guidance for the year to March 2007

As part of our presentation to analysts and investors today, we will be giving
updated financial guidance for certain business areas in the coming year.  In
summary, we are confident of delivering further strong growth from our
established businesses while investing substantially in new businesses where we
believe there are highly attractive long term growth prospects.  The key
elements of this guidance are set out below.

Distribution

The accelerated store opening programme of the last two years has proved highly
successful and we intend to continue with this strategy.  Not only do we have a
much lower store density in our non-UK markets than in the UK, but we also
continue to find ample opportunities for further profitable growth in our UK
portfolio.  Our initial plans are for a further 250 openings across the Group
this year, of which about 50 will be franchise outlets.

We expect mobile connections to grow at approximately 15%, in line with store
growth, with similar levels of growth in subscription and pre-pay.  Our guidance
for a broadly flat like-for-like Retail gross profit outcome reflects our stance
of 12 months ago and although trading continues to be strong, our performance in
the year just ended means we have created some challenging comparatives as we
enter the new financial year.  We anticipate that Insurance and Ongoing revenues
and profitability will track marginally ahead of connections growth.

Telecoms - Mobile

The Phone House Telecom, our German service provision business, is likely to
report a flat result year-on-year.  We will continue to invest in growing the
subscription base, but with a more selective approach to our distribution
channels that will avoid some of the lower ARPU customers that have been signed
up in the last 12 months.  Total investment in customer recruitment for this
business is budgeted to be approximately £40m, a similar level to the expected
SAC amortisation charge for the year.  Our MVNO operations in the UK will
continue to be loss-making, as we seek to maintain the pace of customer
recruitment, although we anticipate a smaller loss than in the year just ended.

Telecoms - Fixed

At Opal we expect revenue growth of approximately 20%, driven by the growth of
TalkTalk Business and data products, and assisted by the full year benefit of
the inclusion of the Onetel corporate customer base.  We expect margins to be
broadly flat, with scale efficiencies being offset by the increasing penetration
of lower margin line rental revenues across the Opal base.

For the year to March 2007 we will split our UK residential reporting into two
parts - the existing TalkTalk operations (including the integrated Onetel and
Tele2 acquisitions), and the new bundled broadband proposition.

Over the course of the year we expect the existing TalkTalk voice customer base
to decline to approximately 2m customers, through migration onto our free
broadband proposition.  We will, however, continue to recruit voice customers
who do not require a broadband service, and aim to raise penetration of line
rental from the current level of 28% up to around 60% by March 2007.  Average
ARPU across the base is forecast to be £17-18, with contribution margin net of
SAC and marketing of around 11%.

New ventures

The launch of free broadband will result in an operating loss from our broadband
business (after all related depreciation and SAC amortisation) of around £50m in
the year to March 2007.  Further details of the proposition and strategy are
outlined in the separate announcement released today.  As a result of this new
proposition, we now aim to have 3.5 million residential customers in the UK by
March 2009, of which over half will be combined voice and broadband customers.

The total cash investment in the initiative in the current year, including
trading losses, infrastructure investment of £50m and capitalised acquisition
costs of £20-30m, is forecast to be approximately £110m.  In the year to March
2008, we provisionally estimate that the project will deliver an operating
profit of £30-40m and be free cash flow positive.

The launch of Virgin Mobile in France will incur a loss of approximately £10m in
the year, with a cash outflow slightly greater than this, as we invest in
marketing and customer recruitment to build towards our target of 1m customers
within three years.  We expect the business to generate a much reduced loss in
year 2 and be profitable and free cash flow positive in year 3.

Group cash flow, balance sheet and dividend policy

This will be a year of unprecedented investment for the Group, with total capex
amounting to approximately £165m, allocated as follows:


New stores, key money and maintenance                 £40m
Opal, including LLU                                   £60m
IT                                                    £50m
Freehold acquisitions                                 £15m

As a result of these higher levels of expenditure and the acquisition of Onetel,
we expect the Group depreciation charge to increase by approximately 40%
year-on-year, including a depreciation charge of approximately £4m within the
anticipated £50m operating loss from the new broadband proposition.

In addition, we plan to capitalise £60-70m of subscriber acquisition costs
across our mobile and broadband businesses, where minimum term contracts apply.
The cash outflow from capitalised SAC is anticipated to exceed the amortisation
charge by approximately £15m.

We believe that the year to March 2007 will represent the peak of the planned
investment cycle for the Group, with capex as a percentage of sales declining to
more normal levels in the following years.      As a result, we intend to
continue to raise the dividend in line with underlying earnings in the coming
year.

Presentation

There is a presentation for investors and analysts on the broadband strategy and
guidance for the coming year at the London Stock Exchange, 10 Paternoster
Square, London EC4M 7LS, starting at 10.00am this morning.  The event will also
be audio webcast live at cpwplc.com.

Next announcement

The Group will publish its preliminary results for the year to March 2006 on 6
June 2006.

For Further Information

For analyst and institutional enquiries

Roger Taylor                                                    07715 170 090
Peregrine Riviere                                               07909 907193

For media enquiries
Vanessa Tipple                                                  07947 000 021

Anthony Carlisle (Citigate Dewe Rogerson)                       07973 611 888
                                                                020 7638 9571

Operating Statistics

Connections, mix and store numbers

                                              13 weeks to                14 weeks to 2 
                                              1 April 2006                April 2005

                                    2006         2005        % change           2005
Connections (000s)
Subscription                             892          728          22.4%                 775
Pre-pay                                 1213          835          45.4%                 879
SIM-free                                 121          113           7.1%                 119
Group                                  2,226        1,676          32.8%               1,773

Store numbers
Directly operated                      1,638        1,391
Franchises                               140           70
Group                                  1,778        1,461


                                              52 weeks to                53 weeks to 2 
                                              1 April 2006                 April 2005

                                    2006         2005        % change           2005
Connections (000s)
Subscription                           3,423        2,770          23.6%               2,816
Pre-pay                                4,252        3,227          31.7%               3,272
SIM-free                                 516          506           1.9%                 512
Group                                  8,191        6,503          26.0%               6,600

Customer bases
                                                            As at March

(000s)                                         2006            2005          % change
Insurance                                           1,921           1,645           16.7%
Telecoms Services - Mobile                          3,073           2,262           35.8%
TalkTalk UK*                                        2,570             920          179.4%
Of which WLR*                                         722               -               -
TalkTalk UK Broadband*                                168              50          236.5%
TalkTalk non-UK                                       341             170          100.5%


* including Onetel and Tele2 UK figures

Switched minutes

                            4th Quarter to March                           Year to March


(m)                   2006         2005        % change        2006          2005           % change
Opal                     1,703         1,583          7.6%         6,559         5,451              20.3%
TalkTalk                 1,929         1,303         48.0%         6,433         4,112              56.5%
Total                    3,632         2,886         25.8%        12,992         9,563              35.9%




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