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Dixons Carphone sales surge but mobile M&A could spoil the happy marriage

Black Friday meant a 'rollercoaster' Christmas, but there could be more thrills and spills to come as suitors circle O2.

by Rachel Savage
Last Updated: 22 Jan 2016

The merger of Dixons and Carphone Warehouse has been looking like a match made in heaven, rather than one giant not so smoothly swallowing another, with the new group dialling in surging sales during a ‘rollercoaster’ Christmas. But the steamroller that is ‘quad-play’ consolidation may well cause some cracks in the six-month-old union yet.

Like-for-like sales jumped 7% year-on-year in the nine weeks to January 3, with 8% growth in UK and Ireland held back by a 4% drop in the battered economies of southern Europe. That’s down on the 9% growth in the quarter to November 1st, but still not a bad first Christmas as a couple.

The newly weds also rang in a full year profit forecast of £355m to £375m, above analyst expectations of £354m. Markets gave that a nod of approval; shares opened 3% higher, but had fallen back to around 450p, a rise of 1.8%, by 8.30am.

‘The strange shape of this year's Christmas trading was something of a rollercoaster,’ chief executive Sebastian James said. ‘There is no doubt that the huge scale and success of our Black Friday promotion impacted the three weeks that followed, but it was good to see customers respond positively to the deals that we had on Boxing Day.’

That echoes the sentiments of Andy Street, the boss of another Black Friday success story John Lewis, who said he hoped retailers wouldn’t ‘stoke the fire’ of the American-imported discount frenzy any more. Analysts had warned before the stampedes in Asdas and Tesco that the day would probably just drag Christmas sales forwards, rather than boosting them – as James hinted did indeed happen.

He doesn’t need to worry about the ‘shape’ of Christmas for a while yet thankfully. What might be on his mind now, though, is the shifting sands of mobile networks, as companies frantically jump on the ‘quad-play’ bandwagon of offering mobile, TV, broadband and landline.

After BT agreed to buy EE for £12.5bn in December, debt-laden Spanish telecoms giant Teléfonica has been searching around for another buyer willing to splash £9bn on O2. It’s reportedly in talks with Hutchison Whampoa, the Hong Kong-based conglomerate that owns Three, TalkTalk and Sky, which is apparently interested in commercial partnerships rather than buying it outright.

It’s anyone’s guess who will pop the question, but whatever happens it will be a headache for Carphone Warehouse, which will probably have to renegotiate with whoever buys O2, as well as deciding whether to offer quadplay packages itself. Will Dixons be able to put up with a crisis of confidence from its other half? Only time will tell.

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