The Week Ahead: Carphone to ring changes with broadband offer

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The Independent Online

Carphone Warehouse is set to steal a march on its rivals by announcing free home broadband access in tomorrow's trading statement, according to sources close to the company. The unbundling of the local loop, in effect forcing BT to open its exchanges to rival operators, will mean that other network operators will have access to the copper wires that connect homes rather than renting the lines from BT, giving them end-to-end coverage.

Carphone Warehouse will offer three months of free broadband followed by a rate of £4.99 per month for 1MB to all customers signed up for its fixed-line service, well ahead of BSkyB's rival offering which is not due until the second half of the year. Many analysts see Carphone's move as a "land grab"; getting customers on board despite the short-term costs.

The broker Morgan Stanley thinks the company has "potentially the most exciting prospects of any of the stocks in our coverage universe". However it also warns that a blue-sky valuation of 700p per share depends largely on regulators and the actions of large telecoms companies, making visibility of future profit streams difficult to predict.

On the numbers front, analysts have pencilled in headline pre-tax profits of £135m, up from £102.1m last year. Regardless of the numbers, tomorrow's announcement is likely to be the highlight of a quiet Easter week.

TODAY: Results: Full year - CeNes Pharmaceuticals; Charles Taylor Consulting; Severfield-Rowen.

TOMORROW: If share price performance is anything to go by, Marks & Spencer should buck the general gloom in retail by delivering a strong trading update. Its chief executive Stuart Rose has delivered on all of the promises he made when fending off Philip Green in June 2004, although the stock is now trading on racy multiples for a retailer, approaching 20 times forecast 2006 earnings. More good news will be required if the share price is to continue rising.

Results: Full year - @UK; Alltracel Pharmaceuticals; Corin Group. First half - St Ives.

WEDNESDAY: A busy week for the retail sector continues with GUS and Burberry both due to issue trading statements.

GUS has already told the market that it plans to demerge its consumer credit ratings business Experian and leave the retail arm to trade as Argos in another listing, although the market has reacted indifferently to the announcement. After reportedly turning away a £7bn offer from a consortium of private-equity firms for the business, GUS intends to do with Experian what it did very successfully with Burberry - float the company and sell down its stake piece by piece. The heavyweight European broker Deutsche Bank believes that recent weakness in the GUS share price is a buying opportunity and has a sum-of-the-parts valuation of 1,300p per share.

Burberry's chief executive Rose Marie Bravo will deliver her last trading update before being replaced by Angela Ahrendts on 25 May, but with good performance already priced into the shares, trading will need to improve further if the shares are to continue to perform well.

Analysts will be looking for signs of improved performance at Austin Reed subsidiary Country Casuals, after sales fell by 11 per cent last year. The US activist investor Dawnay Day holds just over 29 per cent of the company's shares so any corporate activity would require its blessing. At the moment it seems to be happy with its investment, so Austin Reed remains one of the few retailers not to have been the subject of take over speculation in recent months. The broker Teather & Greenwood is looking for a pre-tax loss of £500,000.

WH Smith is also due to report first-half numbers. The business has done well on the cost-cutting and margin-improvement fronts but sales are still suffering. Trading patterns will have been distorted by the late Easter but WH Smith may be the one retailer reporting this week to confirm the high street spending trend - that a difficult market is not getting any easier.

Speaking of gloom, Eurotunnel seems to have been on the brink of collapse almost since the day Britain and France's umbilical cord was completed. Wednesday's results are academic as the company is trying to renegotiate its debt with a consortium of banks that are owed £6.3bn. The original deadline for the negotiations was late March, but no conclusion was reached and shareholders remain in limbo.

Ultimately, the banks can take over the company and change the management, although it is thought that they are not keen on that option. The company wants two-thirds of the debt forgiven, but that is even less likely to happen. Shareholders will have their fingers firmly crossed that a compromise can be reached, and soon.

Results: Full year - Austin Reed Group; Eurotunnel; UCM Group. First half - WH Smith.

THURSDAY: No results due.

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