Carphone Warehouse Group PLC

Content

1. Corporate Overview The Carphone Warehouse Group is Europe's independent retailer of mobile phones and services. 1.1 Corporate History The Carphone Warehouse was founded as a UK mobile phone retailer by Charles Dunstone in 1989. In 2005, the group launched Mobile World an industry first mobile service that allowed customers to make cheap international calls from a mobile phone. 1.2 Key Facts Sales (FY05) US$4.3 billion, Assets (FY05) US$2.4 billion 1.3 Subsidiaries/Affiliates Cooch 1020 UK 100% Beheer-en Beleggingsmaatchappij Antika BV Netherlands 100% The Phone House SA Belgium 100% 1.4 Organizational Chart 1.5 Profiles of Key People Chairman- John Gildersleeve Chief Executive Officer- Charles Dunstone Chief Executive Officer- Andrew Harrison 1.6 Recent Developments In March 2006, The Carphone Warehouse won the prestigious Retailer of the Year award at the annual Retail Week Awards ceremony. In February 2006, Carphone Warehouse teamed up with John Lewis to offer mobile phones at the department store. 2. Business Description 2.1 Business Segments Vodafone operations are divided into three primary business segments: distribution, telecom services and wholesale. 2.1.1 Revenue Breakup The distribution segment reported a y-o-y growth of 27% in FY05. This was primarily driven by strong online growth, which was a result of the full-year impact of the acquisition of E2Save. 2.1.2 Products/Services Mobile phones Network connections Accessories and fixed-line telephony products 2.2 Geographical Segmentation Nearly 58% of the companys revenues were contributed by the UK. 2.3 Key Partnerships Virgin Mobile SpinVox Alistair Carr PhotoBox 3. SWOT Analysis 3.1 Strengths Strong Positioning gives an Edge Diversified Client Base in Fixed-Line Services Strong Cash Position for Inorganic Growth Access to Smaller Towns through Franchising 3.2 Weaknesses Limited Telecom Service Offerings 3.3 Opportunities Up-selling Opportunities MVNO Opportunity in Spain 3.4 Threats Policy Changes by the Ofcom Network Providers Lean on Handset Subsidies 4. Key Business Strategies Expansion Mode Franchise Business Model for Dealer Network Making an Entry in the UK Broadband Market 5. Information Technology (IT) Deployment and its Role 5.1 IT Organization Chart 5.2 IT Infrastructure Ethernet Network Call centers Billing systems Server Date Warehouse Treasury Management 5.3 Strategic Role of IT Increase Market Share Growing business-to-business (B2B) customer base 5.4 Key IT Vendors and Contracts BladeLogic Netezza Corporation Bango.net Intec Informatica Corporation Hewlett-Packard (HP) Site Intelligence ActivIdentity (ActivCard) ActivIdentity (ActivCard) 6. Financial Performance 6.1 Financial Highlights Total sales registered a y-o-y increase of about 22.5% in H106. The operating profit increased by 27% to US$63.6 in H106 from US$50.1 in H105. 6.2 Five-Year Financial Summary Revenue increased to US$4,344.1 million in 2005 from US$1,641.4 million in 2001. Total assets increased to US$2,346.2 million in 2005 from US$1,009.8 million in 2001. 6.3 Ratio Analysis Carphone Warehouse consistently operates at 29-30% gross profit margin levels. In FY05, the gross margin improved by 37 basis points to 29.9% from 29.5% in FY04. 6.4 Market Indicators 6.4.1 Stock Chart The stock of Carphone performed strongly (+68.65% returns) between April 29, 2005 and February 28, 2006. 6.4.2 Earnings Estimates Carphone expects to have 100,000-150,000 broadband customers by April 2006 and 2 million voice customers in the UK by March 2008. 7. Competitive Landscape 7.1 Industry Overview 7.1.1 Industry Definition and Segmentation It is divided into 4 segments: Radiotelephone communications Telephone communications, excluding Radio Telegraph & other communications 7.1.2 Market Overview Fixed Line Wireless Broadband 7.1.3 Key Drivers Decrease in Major DSL Players Market Share European Players Targeting Emerging Markets Cross-Border Mergers Leading to Consolidation Price Competition Mobile Messaging New Avenue for Revenue Growth Emergence of Leased Networks Driving Competition Improved Bargaining Power of Mobile Retailers 7.1.4 Issues and Implications Declining ARPU Regulation Negative Impact on Industry Poor Billing Processes Threat from New Technologies 7.1.5 Outlook The future of mobile retailing in the UK depends on the level of competition between network operators and the resultant handset subsidies in the future. Growth in the telecom services market in Europe is expected to slow down further in 2006. 7.2 Competition 7.2.1 Mobile Retailing Financial Assessment of Competitors Stock Market Performance of Competitors 7.2.2 Telecom Services Competitive Positioning of Competitors Geographical Coverage of Competitors Client Base of Competitors Financial Assessment of Competitors Stock Market Performance of Competitors 8. Outlook 8.1 Company View The Carphone Warehouse is planning a major drive into the UK broadband market in FY06. In the retail sector, the company plans to open 250 new stores in FY06 and invest in training and refurbishments, driving growth in subscription connections. 8.2 Analyst View The Carphone Warehouse has been performing well in the UK and Europe. Its profits are forecast to grow by more than 20% annually, over the next couple of years. Appendices Appendix I Income Statement, 2001-2005 Appendix II Balance Sheet, 2001-2005 Appendix III Mergers & Acquisitions, 1998-2005 List of Tables/Figures Table 1.1 Key Facts Table 1.2 Subsidiaries/Affiliates Table 1.3 Profiles of Key People Table 1.4 Recent Developments (2005-2006) Table 2.1 Business Segments Table 2.2 Products/Services Table 2.3 Partnerships (2003-2005) Table 6.1 Financial Highlights (H105- H106) Table 6.2 Five-Year Financial Summary (2001-2005) Table 7.1 Number of Models (September 2000 and December 2005) Table 7.2 Competitive Positioning Table 7.3 Client Base Figure 1.1 Organizational Chart Figure 2.1 Segmentwise Revenue Breakup (2005) Figure 2.2 Segmentwise Revenue Breakup (H105-H106) Figure 2.3 Regionwise Revenue Breakup (2005) Figure 2.4 Geographical Presence (Number of Stores as on October 1, 2005) Figure 3.1 Number of Franchise Stores (December 2003-September 2005) Figure 3.2 Handset Subsidy at Carphone Warehouse (June 2002-December 2005) Figure 4.1 Carphone Warehouse store opening plan for FY06 by markets (2006) Figure 4.2 Number of franchise stores (December 2003-Spetember 2005) Figure 6.1 Profitability Ratios (2004-2005) Figure 6.2 Performance Ratios (2004-2005) Figure 6.3 Stock Performance (April 29, 2005 to February 28, 2006) Figure 6.4 Revenue Growth (2005-2009) Figure 6.5 Net Profit Estimates (2005-2009) Figure 7.1 European Telecom Revenue Segmentation (2004) Figure 7.2 Western Europe Wireless Subscriber Base (200-2004) Figure 7.3 European main incumbent DSL network connections as share of total DSL network (2001-2005) Figure 7.4 Revenue from Middle East and Africa (2003-2005) Figure 7.5 India Mobile Subscriber Base (2002-2006) Figure 7.6 Network Share (2005) Figure 7.7 Western Europe SMS Revenue (2002-2003) Figure 7.8 Average Wireless ARPU by Region (Q204 and Q205) Figure 7.9 European Telecom Services Market (2001-2008e) Figure 7.10 Turnover (2003-2004) Figure 7.11 Operating Profit (2003-2004) Figure 7.12 Stock Performance (March 24, 2005 to March 24, 2006) Figure 7.13 Revenue by Geography Figure 7.14 Revenue Comparison (2003-2004) Figure 7.15 Operating Income Comparison (2003-2004) Figure 7.16 Stock Performance (March 29, 2005 to March 24, 2006)