Carphone Warehouse to spin off TalkTalk next year

Carphone Warehouse is to demerge TalkTalk's fixed line and broadband business

Carphone Warehouse released its year-end results today, and announced plans to demerge its TalkTalk business.

The annual results to 31 March saw revenue down £390m and pre-tax losses down £72m. But the mobile phone retailer said that it would have made a £133m profit had it not had to take exceptional items like its deal with US electronics retail chain Best Buy.

Charles Dunstone, Carphone Warehouse chief executive, explained that the demerger of the TalkTalk Group's fixed line and broadband business from the rest of the company would allow it to operate and compete independently.

"Best Buy Europe grew out of the TalkTalk Group, but both have now reached the stage where there are no material synergies between them," he said. "The businesses are effectively run as separate entities already, each with highly experienced and strong management teams."

Dunstone added that the demerger would be complete by 2010, and that TalkTalk's recent £236m acquisition of Tiscali's UK broadband business would realise annualised savings of between £40m and £50m by March 2011.

TalkTalk is planning to achieve these savings from customer migration, network integration and simplification, and billing integration.

Dunstone insisted that the company had fared relatively well against a difficult economic backdrop, and that it was hard to compare the 2008/9 results with previous performances because of the Best Buy and Tiscali deals.

"Our retail business has again out-performed its marketplace, increasing connections in a year when we estimate that the European handset market fell," he said, adding that the telecoms business also grew its total broadband customer base.

In terms of its joint venture across Europe with Best Buy, Dunstone said that the firm plans to open its first larger-scale Big Box electronics and mobile phone retail stores in spring next year.