EMPRESA
Carphone Warehouse founder Charles Dunstone to walk the walk on Talk Talk but wants to keep board seats
From The Times
November 17, 2008
Charles Dunstone is expected to remain on the board of both parts of Carphone Warehouse if the retail and telecoms group decides to split itself in two over the next eighteen months.
The Carphone founder will signal tomorrow that he is open to dividing the group, which includes Carphone Warehouse and TalkTalk, that he created in 1989 in an effort to boost its valuation, but a demerger is likely to see him retain board seats at both companies.
Mr Dunstone, the chief executive, has come under pressure to break up Carphone since he agreed to sell a 50 per cent stake in the mobile phone retailer to Best Buy for £1.1 billion in May, creating what some investors see as an inefficient group structure.
However, Mr Dunstone, who owns 32.6 per cent of the company, is not prepared to abandon one part of the business, although it is expected that he would be less involved on the retail side, given that he has appointed Roger Taylor, the finance director, to run the Best Buy joint venture.
Any demerger would take many months to achieve and Carphone is not likely to proceed in the present economic climate. That pushes back the completion of a break-up well into 2009 or possibly the year after. Cable & Wireless, which has been preparing its own break-up, admitted this month that the market collapse had set back its plans. CSFB and UBS, Carphone's house brokers, would be expected to lead the process.
Investors believe that Carphone's shares are labouring under a “conglomerate discount”. A break-up could make an eventual sale of each division easier, given that Best Buy has little reason to buy TalkTalk.
Carphone's joint-venture business is investing heavily in expensive larger out-of-town stores, which began with the 3,000 sq ft shop in the recently opened Westfield centre in West London, and is competing for investment for the capital-intensive telecoms business. There are also worries that high street sales could slow as the recession bites. Last week Nokia, the mobile phone maker, issued a profit warning blaming “a sharp pull back” in worldwide handset sales, including in Britain.
A break-up would also have the advantage of ensuring that the high street stores can clearly assert the principal of providing “expert impartial advice” to customers. Store staff have been selling TalkTalk broadband and home phone connections, creating the perception that the company is pushing its own products. TalkTalk has 2.8 million customers and is third-placed in the UK, behind BT and Virgin Media. It is expected to generate about £300 million in underlying earnings this year, giving it a notional value of about £1billion as a standalone business.
Carphone Warehouse declined to comment. Mr Dunstone is due to present interim results tomorrow.
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