Carphone Warehouse, the mobile phone retailer, is struggling to keep up with voracious demand for its "free" broadband offer, with demand twice as strong as it had anticipated.
Carphone is offering free broadband to customers who subscribe to its fixed-line voice services, the first in a spate of promotions using the lure of free broadband. Orange is offering free broadband to its high-spending mobile phone customers, while BSkyB and NTL are expected to use broadband to promote television services.
The broadband demand bolstered strong full-year results. In the year to 1 April, Carphone, Europe's largest mobile phone retailer, recorded revenue growth of 29 per cent to £3.05bn while profits before tax fell 12 per cent to £81m as a result of the acquisition of OneTel during the year. It raised its dividend by 39 per cent to 2.5p a share. Carphone's shares edged up 2.6 per cent to end at 340p.
Carphone has only 100,000 broadband users, but has received 340,000 applications to sign up for free broadband since it launched two months ago. A third of those customers have defected from other internet providers.
Internet rivals criticised Carphone for taking longer than other operators to connect customers compared to the industry average. Steve Horley, at Tiscali, accused it of "irresponsible marketing and... bad practice". Orange said it can offer users free broadband instantly as part of its package.
But Carphone said it has to switch a customer's line rental and voice calls before it can connect them to broadband and that, so far, every customer has been connected ahead of schedule.
Carphone aims to have 3.5 million fixed-line voice customers by 2009 with 50 per cent of those users also subscribing to broadband.