Trading Statement

Carphone Warehouse Group PLC
11 October 2006



Wednesday 11 October 2006


Embargoed until 0700 hours


                        The Carphone Warehouse Group PLC

                         Second Quarter Trading Update

                         Strong growth across the Group

        Continued momentum in Broadband, with improved customer service


Carphone Warehouse today announces its second quarter trading update for the 13
weeks to 30 September 2006.


Second quarter highlights


  • Total connections up 34.0% to 2.38m
  • Subscription connections up 16.3% to 0.96m
  • 66 net new stores opened, taking the portfolio to 1,921 stores
  • 625,000 applications for free broadband, with 421,000 live as at 30
    September
  • 370 exchanges unbundled, with a further 476 handed over by Openreach



Updated financial guidance for the year to March 2007


  • Approximately £20m of additional costs as a result of strong demand for
    free broadband
      • Now expecting broadband start-up costs of approximately £70m in the
        current year
      • No impact anticipated in March 2008 financial year
  • Strong performance in Distribution and Fixed Line operations to boost
    underlying profitability


Charles Dunstone, Chief Executive Officer, said:


'We have had a very strong first half's trading.  The Distribution business has
performed very well and we have had an exceptional customer response to our free
broadband launch.  I am also pleased to say that our average call centre
answering times are now among the lowest in the industry, as measured by
independently-conducted market research.


'The unprecedented take-up of our free broadband offer means we have accelerated
our customer service recruitment plans and incurred additional wholesale
broadband costs.  We now expect to incur start-up broadband losses of around £70
million in the current year, compared to our original guidance of £50 million.
However, our underlying performance in the first half has been ahead of our
expectations, and we expect interim headline pre-tax profits, before the impact
of our broadband and Virgin Mobile France operations, to be up 50% 
year-on-year.'



Distribution

Total connections grew by 34.0% to 2.38m year-on-year in the 13 weeks to 30
September 2006.  Subscription connections were up 16.3% to 0.96m, as network
promotions and the attractive handset pipeline continued to stimulate the
market.  Pre-pay connections were up 59.0% to 1.29m, reflecting a continuation
of the trend witnessed over the previous six months.


We opened a further 66 net new stores in the period, taking the base to 1,921.
We now expect to open a total of 300 net new stores in the current financial
year.  The Insurance business continued to perform well, with the base up 16.5%
year-on-year to 2.06m.


Telecoms Services


Free broadband update

As at 30 September 2006, we had received 625,000 applications for free
broadband.  Of these, 516,000 are now live for calls and line rental, with
421,000 live on broadband as well.  So far we have unbundled 370 exchanges, with
a further 476 exchanges handed over by Openreach.  We remain well on course for
our target of 1,000 unbundled exchanges by May 2007.


20,000 broadband customers were on unbundled lines at the period end.  Over the
next three months we will start to use Openreach's bulk migration platform to
transfer customers onto unbundled lines in significant volumes.  We will update
the market on progress at our interim results presentation on 2 November 2006.



We have made significant progress in relation to customer service levels over
the last two months.  Customers are now going live on broadband typically within
5 weeks of application, which includes the necessary time for arranging
wholesale line rental, carrier pre-select and IP Stream transfers, and we expect
to reduce connection periods further over the coming weeks.  In addition, call
centre response times have improved materially, with independent market research
now indicating that waiting times are now among the lowest in the industry.  We
will continue to invest to make TalkTalk's customer service a positive
differentiator.



Primarily as a result of the unexpectedly high demand for free broadband, we are
set to incur additional costs in the current financial year amounting to
approximately £20m.  The three factors relating to this cost increase are the
incremental wholesale broadband costs incurred across a larger base, delays to
LLU migration and an acceleration in customer service costs.  We expect these
additional costs to have an impact in the current year only, with the immediate
development of broadband customer profitability being dependent on the speed and
quality of BT Openreach's processes for bulk migration to unbundled lines in the
coming months.



Aside from the one-off acceleration in customer service costs, free broadband
customer economics to date are evolving in line with previous guidance.



Other Fixed and Mobile operations

Trading in our existing TalkTalk UK residential operations has continued to be
strong.  The integration of the Onetel acquisition has now been completed ahead
of schedule, and as a result of this and good underlying margin trends, we
expect the existing customer bases to achieve profits for the year a little
ahead of existing guidance.  Our other Telecoms Services operations continued to
perform in line with expectations.



Presentation and webcast

There will be a presentation for investors and analysts at 10.00 am this morning
at City Presentation Centre, 4 Chiswell Street, Finsbury Square, London EC1Y
4UP.  The presentation will also be accessible via our website, www.cpwplc.com.

Next trading update

The group will publish its interim results on 2 November 2006.


For Further Information


For analyst and institutional enquiries

Roger Taylor                                   07715 170 090

Peregrine Riviere                              07909 907 193


For media enquiries

Vanessa Godsal                                 07947 000 021

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


Operating Statistics



•         Connections and store numbers


                                              13 weeks to 30 September 2006


                                                2006                2005    % change
Connections
Subscription                                 964,395             829,482           16.3%
Pre-pay                                    1,285,484             808,734           59.0%
SIM-free                                     132,114             139,752          (5.5%)
Group                                      2,381,993           1,777,968           34.0%


                                              26 weeks to 30 September 2006


                                                2006                2005    % change
Connections
Subscription                               1,819,947           1,553,698           17.1%
Pre-pay                                    2,279,539           1,429,319           59.5%
SIM-free                                     240,670             247,229          (2.7%)
Group                                      4,340,156           3,230,246           34.4%

Own stores                                     1,754               1,483           18.3%
Franchises                                       167                 103           62.1%
Total stores                                   1,921               1,586           21.1%



•         Customer bases

                                                      As at 30 September 2006


(000s)                                               2006            2005    % change


Insurance                                           2,061           1,770           16.5%

Mobile - TPHT                                       1,300           1,015           28.0%
Mobile - UK MVNO                                      429             190          126.0%

TalkTalk UK - existing                              2,141           1,059          102.2%
  Of which line rental                                819               -               -
TalkTalk UK - new offer                               516               -               -
  Of which line rental                                516               -               -
TalkTalk UK - total                                 2,657           1,059          150.9%
  Of which line rental                              1,335               -               -

Broadband - existing                                  107              68           57.4%
Broadband - new offer                                 421               -               -
Broadband - total                                     528              68             N/M

TalkTalk non-UK                                       372             249           49.3%



•         Additional broadband statistics (excludes existing base)


                                                          30 September 2006             26 July 2006


Total applications (000s)                                               625                      476
% inside 1,000 exchange footprint                                       83%                      83%
Live on calls and line rental (000s)                                    516                      402
Live on broadband (000s)                                                421                      247
% from existing TalkTalk base                                           51%                      53%
% existing broadband users                                              45%           40% (estimate)
Exchanges unbundled                                                     370                      303
Exchanges with backhaul                                                 543                      N/A
Exchanges handed over                                                   846                      518
Exchanges with > 500 customers                                          362                      189
Exchanges with 250-500 customers                                        478                      503


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