Tuesday, April 11, 2006

Buy the rumor, sell the story

Well, it's true, of course. A briefing is to take place shortly. Meanwhile, check out IP Development Network's interesting analysis piece.

UPDATE: Now on the webcast, Charles Dunstone says the Carphone Warehouse is currently getting 40k hits per hour on its website in the wake of the announcement. He's now saying that a 40GB download cap gives 8,000 mp3 downloads or 100 hours of movie downloads (hurrah! - except that there are numerous anecdotes of P2P throttling - does he expect that anyone out there is going to actually pay for 8,000 mp3's in a single month?).

The fine print features an 18-month contract period, with a GBP70 cancellation policy, and while the company reckons it will have 1,000 exchanges unbundled by May 2007 (well ahead of previous indications), for out-of-footprint customers there is an added GBP9.99 monthly charge. The company estimates it will take an average of six months per customer across the footprint to migrate from a BT Wholesale product, incurring a GBP70 loss per customer on acquisition (GBP30 SAC, GBP40 IP connection charge for BT), which they say compares favorably to SACs in the CPS market. Also, if an applicant lives in an area which is scheduled to go live within ten weeks, CW will delay connecting the customer for that period - not so sure this will be a hit with customers. There is also some discussion of real-time algorithms which adjust the customer support function capability to match projections of demand, to ensure the company can handle demand (this is at odds with comments I've seen on user forums). P&L hit of GBP50m at EBIT level, cash out of GBP110m in the current financial year. Expecting BT to hand over 400 exchanges by 1st July, with 200 live by that date. Company claims cash breakeven at 250 subs per exchange.

Nevertheless, I think the brand is strong, the price and marketing spin sexy, and the company has distribution and cross-selling opportunities galore. Company aims to have 3.5m residential customers by March 2009, over half of which it expects will be broadband customers. Depending on demand levels, I think this may really challenge Openreach, whose delivery metrics seem to have hit a plateau. It's also going to create an interesting background for entry into the market by newcomers like Sky and Vodafone (and Telefonica/O2?).

UPDATE 2: It's now 11:29 AM, and Charles Dunstone has just said he has received a text message saying the site is signing up a new broadband customer every ten seconds.

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