Carphone Shares Sink 11% on Fall in Broadband Demand

Europe's biggest independent mobile phone retailer Carphone Warehouse has seen falling broadband demand due to a slowdown in the housing market and is cautious about the year ahead, it said on Thursday.

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Shares of Carphone Warehouse closed 11.1 percent lower.

Carphone said the year had started well for its mobile retail business, with mobile connections in the first 10 weeks up 12 percent year on year, compared to its growth target of 8 to 10 percent.

But it said broadband net and gross adds were lower than expected so far due to the slowdown in the housing market and a strong performance in mobile broadband sales.

It said however that churn, or the number of people leaving the service, was also falling.

"If these trends continue, we expect lower revenue growth this year than previously indicated, compensated by improved margins," the group said, of its fixed line business.

It said its overall outlook for the year ahead remained cautious, given the poor economic climate and inflationary pressures on European consumers.

The UK-based retailer and broadband supplier posted headline pretax profit in line with market forecasts, up 75 percent to 216 million pounds ($423.4 million), reflecting the reverse of last year's steep losses incurred as it launched free broadband.

Group revenue was also in line at 4.47 billion pounds for the year to March 29, and it increased the full year dividend by 31 percent to 4.25 pence.

"With two well-positioned businesses, a high quality asset base, significant new growth opportunities and a strong balance sheet, we feel well placed for what we are sure will be a tougher consumer and trading environment," the group said.