Has Carphone drawn a line under bad times, or are things about to get worse??

News that Carphone Warehouse’s UK marketing director Dominic Rowell is leaving after less than a year (MW last week) came on the same day the company announced its second-quarter results, revealing a steep fall in broadband subscriber growth.

The mobile phone retailer, which launched its “free” broadband service 18 months ago, added 89,000 subscribers in its second quarter, compared with 126,000 in the previous quarter – a fall of almost 30%.

The stuttering performance comes at a challenging time for Carphone. Customers who signed up for broadband last year are near the end of their contracts and experts are predicting that the poor customer service many have received could spark an exodus.

Rowell’s resignation has surprised the industry because he only joined Carphone at the start of the year. He came from McDonald’s, where he was head of marketing, with a big reputation and an impressive CV. Prior to McDonald’s, Rowell worked on the Walkers brand at Pepsico and spent seven years at Sainsbury’s, during which time he oversaw the high-profile advertising pitch when Abbott Mead Vickers.BBDO took the supermarket’s £47m advertising account.

At Carphone, he is responsible for retail and product marketing, as well as brand development. It is thought he will leave the business at the end of the year.

Carphone constraints
Sources say Rowell felt constrained at Carphone because of the power of the senior management team around founder and chief executive Charles Dunstone, which includes Clarke. One insider adds: “There is a bit of a club mentality and if you’re ambitious, as Dominic is, progress is limited when you don’t break into that group. There is a lot of stick at Carphone but not a lot of carrot.” 

But the source says of the senior team: “They are very good at what they do. The market conditions are tough but they intuitively get it right.” 

Carphone revolutionised the industry last year when it launched “free” broadband for customers of its TalkTalk fixed-line service. But it underestimated the popularity of the offer and was hugely oversubscribed, leading Dunstone to admit that the launch had been a “bruising” and “painful” experience (MW September 7, 2006).

Enders Analysis senior analyst Ian Watt says: “It has re-established momentum and fixed a lot of the customer service problems, but that momentum is relatively fragile.” 

Watt believes the most significant progress Carphone has made is in moving more customers onto its own network rather than having to use BT’s. Carphone makes losses on customers who obtain internet access via a BT wholesale product. They only become profitable when they switch to Carphone’s network. Of Carphone’s 2.5 million broadband customers, 1.4 million were on its own network by September 29.

Profits or customers?
Carphone has set itself a target of 3.5 million broadband customers by 2010 but Watt says: “If it has a choice between making the 3.5 million target and making itself profitable I think it’ll choose the latter. It makes more sense.” Carphone, which celebrated a significant landmark in its 18-year history last month when it joined the FTSE 100, is looking forward to an “iPhone Christmas” after winning the rights to sell this year’s must-have gadget from the start of next month.

Rowell’s successor will be joining Carphone at a critical time for the company but he or she will also have to master the political game in order to get ahead.

Latest from Marketing Week

NOT REGISTERED? IT'S FREE, QUICK AND EASY!

Access Marketing Week’s wealth of insight, analysis and opinion that will help you do your job better.

Register and receive the best content from the only UK title 100% dedicated to serving marketers' needs.

We’ll ask you just a few questions about what you do and where you work. The more we know about our visitors, the better and more relevant content we can provide for them. And, yes, knowing our audience better helps us find commercial partners too. Don't worry, we won't share your information with other parties, unless you give us permission to do so.

Register now

THE BEST CONTENT

Our award winning editorial team (PPA Digital Brand of the Year) ask the big questions about the biggest issues on everything from strategy through to execution to help you navigate the fast moving modern marketing landscape.

THE BIGGEST ISSUES

From the opportunities and challenges of emerging technology to the need for greater effectiveness, from the challenge of measurement to building a marketing team fit for the future, we are your guide.

PERSONAL AND PROFESSIONAL DEVELOPMENT

Information, inspiration and advice from the marketing world and beyond that will help you develop as a marketer and as a leader.

Having problems?

Contact us on +44 (0)20 7292 3703 or email customerservices@marketingweek.com

If you are looking for our Jobs site, please click here