Smash hit

The data give weight to his conviction: amid an otherwise bleak set of post-Christmas retailing results, Carphone Warehouse sparkled. For its quarter to December, the group reported a 28 per cent surge in sales.

Analysts expect another set of strong results in April when the company releases a trading update. It is expected to report that it has surpassed the £100 million pre-tax profit mark for the first time and accrued 900,000 residential fixed-line customers on its TalkTalk service.

In an industry where seeing into the future is vital, Dunstone is ahead of the game. By 1999 he had recognised that simply selling handsets would not on its own be enough to sustain the stunning growth that the group had enjoyed.

“We began to think that the market was going to become different as we got to higher levels of penetration and that the model of just being about customer acquisition was not going to be as important when that change happened,” Dunstone says. “That was when we started to make the business into one driven by more recurrent revenue streams rather than just making profits out of selling phones in shops.”

So, over the past five years the business has transformed itself from a pure mobile seller to one making profits from a variety of telecoms services that ensure that customers have a sustained relationship with the business.

These range from the group’s fixed-line telecoms service, TalkTalk, which competes with BT, to the broadband business, TalkTalk Broadband, to business telecoms services.

Last week Carphone launched another new service, offering cheap international mobile calls. It is the latest attempt by Dunstone to carve out a niche within an untapped area of the telecoms market.

Another recent development was his revamping of his Fresh brand — the Carphone mobile service targeted at the low-end pre-pay market.

Though some in the industry have questioned whether selling his own branded products will dent Carphone’s all-important reputation as an independent provider, Dunstone argues that this is not the case.

He says: “We are not saying to customers, ‘This is a cheaper tariff than one that Vodafone offers’, we are saying that this is a cheaper version of the product we do not sell — the EasyMobile product. We want to offer every tool in the toolbox to our customers.”

The group’s fixed-line service is also expanding across Europe. It is already in Spain, Switzerland and Germany.

Today recurring revenues account for 60 per cent of group revenues — up from 25 per cent four years ago.

Meanwhile the core retail business continues to expand rapidly. Today there are more than 1,000 Carphone Warehouse stores throughout Europe.

While applauding the “operationally very strong” business, Christian Maher, telecoms analyst for Investec, questions how easy it will be for Dunstone to juggle all these different balls.

Dunstone counters that investors need only look to his latest results to see that is not a problem. “Yes, we have lots on, but if we’re not doing lots of different things, how will we grow the business?” he says. “We don’t decide the timing of broadband or whatever it might be, but we have to capitalise on it when it happens.”

Although the markets in fields such as fixed-line calls and broadband are highly competitive, Carphone is uniquely positioned to succeed, Dunstone says, because of its strong brand and the relationship that it already has with its large customer base. “If we find an area competitive, our rivals will find it doubly so,” he says.

In the fixed-line arena, Dunstone is gunning to break BT’s hold. “I’m amazed,” he says. “I can’t think of any other market place so dominated by one brand. There is no Pepsi to their Coke, no Virgin to their BA. On the street, no one knows about Cable & Wireless because it is a business brand.”

Dunstone does not express concern about one gathering cloud on the horizon. In an attempt to cut the costs of wooing customers and to ensure greater loyalty, some of the major mobile operators are increasingly selling their phones directly through their own outlets and call centres, instead of through middle-men such as Dunstone — to whom they have to pay a commission.

O2, recently stated its intention to do this, creating a new call centre and taking on 2,000 new staff.

Dunstone shrugs off this concern, arguing that, as Carphone’s cartoon character “Mobiley” seeks to express, people’s relationships are not with their operators but with their handset. “It is the phone that goes with them where they go,” Dunstone says. “It connects them with their friends.”

And the way ahead? “We don’t need luck, something to change or blow our way,” Dunstone says. “We just need to keep a very level head, execute well and deliver.”

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive