百思買 (BBY) 0 Q0 法說會逐字稿

Good afternoon, everyone. Thank you very much indeed for coming at short notice. I thought I'd just do a few introductory comments and set some context for the announcement that we've made today.

So clearly there are four key elements of that. I guess to start probably with the most significant which is the sale of our interest in Best Buy Mobile. Our partnership with Best Buy has been absolutely fantastic and both parties entered into this venture with -- everyone has worked as hard as they can to make it a success. I think it's probably fair to say it's been a greater success than either of us ever imagined at its outset.

But one of the things that I've always said to our team is, at the point where what we're doing or the arrangement in some way handicaps one side of the partnership from being able to do what they need to do in their business, we are really going to have to go and think about it.

Clearly since we started the process just with mobile phones, the number of connected devices within the store has grown enormously. Our arrangement that we had related to mobile phones, but not a broader range of devices and for me there was a real risk that we were going to get into a situation where rather than actually be enabling a better proposition for customers, and a growth market within the stores in the US and Canada, that in fact actually we might begin to actually restrict the potential of that growth that Best Buy need to roll the connectivity strategy throughout the store.

So at that point really we began to sit down with them and say, well, how do we move forward, what's the best route to move forward? Either we try and put something together that has us involved in a wider range of products, but that's clearly extremely complicated to negotiate at this stage. So we decided at this point the best thing for them and indeed the best thing for us, was to let Best Buy do what they need to do and the way they want to evolve their stores into full connectivity.

We've negotiated and they're going to pay what we believe is a very fair price for the business that we created. I'm sure that there's lots of people with spreadsheets and analysis and ideas of what all this is worth, but these things are only actually worth anything if they work for all the parties involved. And I think if we hadn't worked forward, in time the relationship would have become, could actually have become dysfunctional as we bickered over what size of the store we should have or what product categories we would be selling.

So I think this is a very elegant and very, very good outcome from what has been a quite fantastic partnership, which both parties has always, always worked with best intentions for the positive growth and output of the joint venture.

In terms of the Big Box stores, I think also we should start that off by saying we're incredibly proud of the proposition that we delivered to customers. It was unfortunately at enormous expense to us as shareholders, but in terms of the enthusiasm, the people in the stores, the range that we presented to them and the feedback and scores that we got, customer satisfaction scores we got from customers, we developed a product that was absolutely fantastic.

I think unfortunately from the time that we decided to bring the Big Box stores to the UK, a number of things changed. I think you probably -- we were too slow to get going, so we were a bit late to launch them. In that time, clearly consumer confidence has fallen significantly, the product cycle is quite tough to be trying to launch a Big Box model into, and I think it is fair, and we should pay some tribute to John Browett and the team at Dixons in that their improving proposition, their improving stores, their improving service has filled some of the void that we were going to target at.

And thankfully we sat down with our partner shareholders recently and we've been looking at how much capital we'd need to invest to take the stores to 100 plus stores across the UK, and it really, given the returns that we've been making today is just an impossible decision to justify.

So once you've concluded that, we obviously can't just run 11 stores, that in itself is completely uneconomically viable, so we've very reluctantly come to the decision that we need to close those stores.

We believe that we're going to be able to offer employment within Carphone Warehouse, within the UK venture to over 70% of the people that are employed within Best Buy. So reluctantly there will be some job losses but we will be trying to minimize those as much as we possibly can.

We're also announcing today the launch of the Global Connect, and I suspect it may get passed over as much as the formation of Best Buy Mobile was all those years ago. But really the idea is, having had such a fantastic experience of understanding the CE retailing environment from the Best Buy point of view, and our ability to bring the knowledge we have about adding connectivity to that marketplace, we've had a lot of interest from people in other markets that want to try and take our learning in their markets.

They've seen what we've done in the US, so we've agreed to do that together, again, very hard to put any numbers against it, but we've got some very interesting conversations going with people. And actually the combination of Best Buy and Carphone Warehouse is a very, very strong proposition to these sorts of organizations.

So Roger will talk more about it and I think we'll obviously have more to say in the future.

So really, I think our big focus, and as we've put here, we'll talk about it, is what we're seeing is connectivity is growing. The sort of devices that we sell is where the most interest is within this sector. With tablet, the enormous growth, continued enormous growth in smartphones and the competition between people with the operating systems and manufacturers and the operators. And I think both parties have decided that in the current environment, absolutely the best thing that we should do is work very hard about improving connectivity within our existing format.

We've seen very, very, very, good results from our Wireless World stores and really we want to put our effort and our capital into investing into those formats, clearly rather than investing in opening more Big Box stores.

So I'm going to hand over to Roger now who is going to put all this -- put a little bit more detail and context to it. Thank you very much.

Thank you, Charles. Okay. I think just before I dive into some of the strategic messages that Charles just outlined, I'd give you a bit more detail on those. Maybe just briefly cover as well our interims in really one or two slides. I do appreciate there's an awful lot of messages today, so we will come back and put some more light on those in a second.

Just briefly before we dive into that, the interim results, I think hopefully most of you have had a chance to read the statement out this morning. Appreciate in the context of other things it's probably not had a lot of focus. But just to reiterate now we can break it out between continuing and other businesses. I think just the key messages are in terms of the two continuing parts of our Group. Both the European business and Virgin Mobile, really very solid start to the year, in line with guidance we gave you back in June and just reiterating really our full-year guidance in both of those businesses.

Just in terms of one or two specifics, just remind you in terms of the European business, first half. Earnings in line, obviously impacted year on year again, reiterate the 18 to 24 month contracts issue which I'm sure you're all very familiar with. Good news obviously we're out of that period now and starting to see some real effects of that into October and November, both with product launches and with people now coming back into the upgrade cycle.

So, lots of optimism around our European business, which I'm going to try and cover in a few minutes as well, around some of the strategic ideas. I think hopefully over the next few months, give you much more light, throw much more light onto what we see in our European engine for growth going forward.

Just another pull out there, the prepay market, certainly during the period over the last six months as anticipated in June, with the shifts in mobile termination rates or less subsidy going into a lot of the prepay segments, and as a result suddenly seeing a slowdown in overall volumes in prepay.

What's interesting is whilst we have seen that reduction in volume, actually, the profit pool from that segment within our overall European market has stayed constant from where it was 12 months ago. So really very much there aligning up our interest with the networks towards actually connecting higher value customers onto their network within a segment which has historically not been that profitable for the mobile operators and I think we can play a role here and are already doing so and making it a much more profitable segment for them, and indeed hopefully getting a better proposition to the customers.

I'll come on to show you some pricing points in a second, because it's relevant for our fee for the rest of the year.

Virgin Mobile, I think had an outstanding end of last year you may well recall in terms of customer growth. That momentum's continued very strongly into the last six months. 22% revenue growth within telecoms operators in Europe is pretty unheard of at the moment. I think that business continues to enjoy astounding growth and is really the same momentum continuing into the full year and beyond as we continue to build out both our full MBNO platform and indeed connect customers onto our Orange network as well.

So it's a business clearly, one where we're driving for value which we constantly refer to. We're going to achieve that best by maintaining growth of good quality customers onto our base. So, just to reiterate really for the full year, very confident in guidance.

Just to cover off in terms of both our US numbers again, very much in terms of the US number, in line, I think, with expectations. Obviously a slowdown in Q2 that you all saw. Obviously driven predominantly by product launches or the lack of new product launches in Q2. Otherwise in line for the six-month period to September.

And a point that Charles alluded to around the overall Big Boxes, I think that loss rate there is even higher than we guided back in June. Obviously reiterates our strategic decision we announced today.

We go onto the prepay. So we just quickly feed up to Christmas, always relevant at this time of year, just to reflect on prepay pricing. A point we made back in the early part of the year, this Christmas and success of prepay into the Christmas is going to be influenced a lot by the pricing points as we're all very, very conscious of in terms of the current consumer and economic environment. It's going to be very much driven by the pricing point of the smartphone segment within prepay.

As you can see from the pricing points, there, if you were to compare those to our Buyers Guide back in May/June, you'll actually see for a number of those propositions, they're slightly more expensive to the consumers than they were at that point in time. Which clearly when we look at the levels of volume and anticipate going into Christmas, clearly it will be influenced by the pricing point.

Really no change virtually from where we were 12 months ago, and that's been driven certainly by MTR, mobile termination rate impact and so some of the reduction in subsidy.

So our role in this is to make sure we make more money per handset, per connection, which I think we've successfully done to date around networks, but we're not anticipating a stellar volume of prepay going into Christmas given the pricing points and the current consumer outlook.

So on that basis we really --- we have given the guidance of GBP135 to GBP150, we're reiterating that we're within that guidance but certainly at the lower end, which I think is broadly where expectations are now in terms of consensus view.

Slightly contrary to that though if you look at the postpay market. Again first six months of the year affected by the upgrade cycle. Also to be honest, no great product launches in that period. Clearly that is in the process of transforming. So we have got some fantastic product launches.

Obviously Apple launching the iPhone 4S, Nokia announcing their 800, Lumia 800. More recently HTC has relaunched the Sensation with the Dr. Dre headsets, amongst others, along with the Blackberry and of course some of the Samsung products.

I think this chart is actually most interesting. If you just look at the table below, and look at the actual pricing points available going into Christmas. Not only have you got free handsets on some reasonably aggressive tariffs, we've also got a number of propositions on top of that in terms of the gift nature for Christmas, and also driving therefore more potential uptake for postpay into the Christmas area. And it reflects, I think, the competitive nature of some of the gifts being provided alongside those propositions.

So no lack of desire to get customers onto postpay. Propositions continue to be very healthy for the customer and I think as such we'll probably continue to see a migration again, probably from higher-end prepay customers now, preferring to go onto a postpay proposition.

So if all goes well, that's really reiterating our confidence for the rest of the year in terms of our overall profit targets for the full year.

So just moving on then to a bit more light on the strategic issues that Charles covered at the outset. I think in terms of the Big Box decision, clearly an emotional day for everyone within the business. It is fair for us to just reflect on the people working in the business and what a fantastic job they've done. And our thanks goes out to all those people who have worked within the stores and within our support centers for the fantastic job they've done over the last two and a half years. I think they've achieved some amazing targets as Charles alluded, but particularly in terms of the customer experience which I think has raised the bar in terms of UK consumer electronics retailing.

From a purely financial perspective, clearly very hard for us to see how we can carry on investing at the rate we have been doing with any visibility of acceptable rate of return. And certainly when you consider the other opportunities we've got as a business, particularly into the connected world, the pace of our Wireless World stores, and the investment opportunity we've got within that space, it's really not a difficult decision for us to sit down and make from a purely economic perspective.

And that's why we've agreed to focus all our efforts onto our strengths, our core proposition around the connected world.

The store closure, obviously going through a consultation process with the employees, but we anticipate most of those really being by the end of the calendar year. The further GBP25m or so of losses until that point in time which are a pretty simple extrapolation from what we've already incurred in the first half.

Probably the most encouraging thing though is we should be able to redeploy the vast majority of the people within that business. Fair to say I think we've actually recruited some phenomenally talented people; trained them in some case for eight or nine weeks. They are people who understand within those stores very much at the heart of them is the connected space. Those people can clearly be enormously useful within the other parts of Carphone Warehouse. We dearly hope that we'll be able to retain virtually everyone who actually wants to stay within the Carphone family going forward.

Exceptional costs of closure broadly in line with what we've talked about before. Clearly covering all financial commitments would amount to GBP65m to GBP75m. The large majority of that clearly being the store leases which we have the 11 store leases, as always in these cases, when you look at the 11 leases, half seem to be something that you can pretty well think you can sell pretty easily. Half however, may just not be so easy and we're just going to have to work our way through those over the next few months and see what we can achieve.

But we've made a reasonable assumption circa four years or a bit more in terms of the average to get out of those, hopefully we can do so more efficiently.

We've got some non-cash write downs. I think the most important thing though as shareholders in Carphone Warehouse is for us to just sit back and reflect on basically how much money we've put in from start to finish. And overall it's a very sizeable amount of money from beginning to end, but it will be about circa GBP100m each in terms of both ourselves and Best Buy that we've sunk into that opportunity.

Not all wasted in terms of things we've learned and I think that a lot of the things we internally have learned into the Wireless World stores has actually been crystalized out of our move into the Best Buy stores. A lot of learnings around how we can further our product categories, how we can provide additional service and proposition in our Carphone Stores.

So we do appreciate it's an awful lot of money that we've put into it, but we should put it into the context of things we've learned from that business.

It does, of course, therefore mean that the upside out of this decision is that we can now have one management team focused on one brand, one core business strength across Europe. And it's that that gives us an awful lot of confidence in the growth opportunities into our European business.

If only this was more connected. There we go. I think I've talked to you a number of times around the Wireless World and the opportunities we've got within that. I think just to reiterate what we mean by the Wireless World and how we've developed it over the last year or so, again reiterating the fact that we're broadening the product range within that space. We've done that in a number of ways from mobile obviously into tablet laptops. Certainly talked about a number of other home audio and accessory gaming products and we continue to see opportunities within that connected space for us to do that as we connect more pieces of hardware to service providers, both mobile and fixed line operators, and indeed other content providers.

Continue as I've talked about a lot over the last year around focusing on an area which we believe has to have three characteristics for it to be very profitable within consumer electronics. And that's product categories that have good profit pull, clearly the connected products we're talking about because of the complexity between a service and a piece of hardware have the ingredients to be highly profitable and I think we've demonstrated that really the core of Carphone's history and now feel we can expand that into other product categories.

It's important they have a differentiated service proposition and again, everything we're doing in this phase is something that requires customers to actually embrace a wide service proposition, obviously in our case branded under the Geek squad, but it's a place where people want to come and embrace that and actually talk to people in the stores. And again that's the differentiation to a lot of other CE categories available in the market today.

Thirdly, actually having some barriers to entry and the connected space has enormous barriers to entry for other people to understand the complexity of what's involved in mobile phone and connected services retailing. I think we bring all those categories in spades into this space.

Clearly multi-channel there's an opportunity we can develop further, broaden some of the product categories again, that's some of the learnings we've had out of our move into the Best Buy stores and their multi-channel opportunities. So again having a single multi-channel platform within the Carphone umbrella, but broadening the actual product categories within that space. And again, obviously in common with a lot of retailers, then looking to extend the number of customer touch points.

What does that actually mean in terms of what we're going to do around the European business? Clearly an opportunity, what we call almost the Wireless World plus plus. This is us going to the next level. I think stores we've more recently opened have extended the product range further. We see that continuing as an opportunity. The store conversion rate, we've accelerated enormously to converting eight a week at the moment into Wireless Worlds, just in the UK.

An opportunity to get to a similar rate across Europe. I think as a result of that, we're clearly seeing opportunities, we've got lease expiries to actually take out larger stores in the same vicinities. We're very confident there, talking about 15% to 20% growth in actual space over the next three to five years as we look to increase our average store size, as I say, both in the UK and particularly actually in mainland Europe, a number of countries where our average store size in a lot of cases is down at 40 or 50 square meters in terms of sales space.

We know we've got to increase that if we're going to embrace this wider product category going forward. So a lot of work from our property team to make sure we deliver on that, over that period of time.

And as I alluded to, an opportunity for us to expand our online proposition and make the most of a truly multi-channel retailing opportunity that we see in front of us.

And I think as we've already demonstrated economically as indeed demonstrated this year already, those new stores are showing a very compelling return for the investment. If you remember that's a key lynchpin to this current year's performance and we're very confident about rolling that out into next year.

So lots of growth opportunities for our European opportunities to embrace us across all our mainland European markets. And it really reiterates our opportunity of what we're looking to take internationally as well, outside of Europe.

Which brings me onto Global Connect, this is really about embracing what we have within -- what Best Buy has under its umbrella and what we have across Europe and taking the very best of that into other markets.

In terms of opportunities, clearly there are numerous opportunities and everyone's tried to spend the whole day pinning me down to which markets are going to come first. We are talking to a number of partners across a number of countries, a number of regions around the world.

We obviously can announce the fact that we're moving to China, I'll come onto that in a second. Because the obvious choice there of CE to partner with through Best Buy. But we have a number of other partnerships in which we are certainly in reasonably progressed conversations with. We have a number of countries which they tick the box in terms of the opportunity.

So by that, obviously looking at the economic position of certain markets, look at the population, GDP per pop. Looking at the mobile and fixed-line operators in the markets, seeing how many there are, seeing the competitive nature of those. And of course picking partners who are ideal for us to go and help in terms of both embracing the connected world, but also have decent coverage across their own countries.

So a number of characteristics which we're looking for in choosing the right partners. But pleased to say a number of companies coming to us and asking how we can help them deliver this connected space. So we're very excited about this over the course of the next few years in broadening out and accelerating this opportunity. It has the potential to be a capital-light business, just like Best Buy Mobile, and if you're imagining what we're doing it would be very much the same as what we did in the US five years ago and replicating that in a number of countries.

And again it is taking quite a unique skill that we have in terms of our own expertise, certainly our vendor relationships, in some cases our network relationships which are global operators and taking some of our best retail practice certainly comes from our experience with Best Buy. You can appreciate how fast they managed to roll out across 1,100, 1,200 stores three years ago to get Best Buy Mobile to get to scale very quickly in the market. There's a real skill in achieving that and that's where again Best Buy will bring some of their expertise in helping us do that once we've identified the right partners.

And I think we've got what I'd call an effective operational governance for that in terms of how we can make that happen. It's an umbrella, Global Connect that sits across the European business and the US business and obviously new potential markets so that we can very much pull the very best out of each of those operations into that central resource to help them expand into those new markets. So again, you should see people out of both Europe and out of the US landing into those new territories very quickly to complement existing retailers.

So just whilst we're on that, just to give you the first of those and hopefully I'll be coming back over the next coming months and talking about other new markets and give you more detail on that and throw some real light on the scale of the opportunity, the pace at which we might wish to roll it out and indeed the ultimate -- give you some idea of the ultimate value matrix which will help you determine the true worth of this opportunity to both partners.

China clearly a huge market, a developing market it's fair to say in terms of mobile. Lots of progress more recently in terms of the opportunities where we do see a lot of excitement in rolling out very quickly across that market. Obviously hugely helped by Best Buy's existing presence across their Five Star brand, just over 200 Big Box stores where we see an obvious opportunity to replicate the SWAS model that you'll be familiar with in the US. But also then to cover the scale of market opportunity (inaudible) to think about the SAS opportunity across that market as well. And doing that again in tandem with our Best Buy partners.

So really a question of just getting on. We've got a team on the ground in China, made up again of a number of Carphone representatives, a number of Best Buy people and really working on a launch really for early '12. So quite excited about getting on with that very quickly and I will continue to throw more light on that every time we stand up in terms of that and some of the other markets we're looking at.

Which moves me on really then to the transaction that we announced today and just throwing a bit more light on that in giving you some other perspectives around some of its components.

It is worth reflecting, I know everyone jumps straight to a headline number. There's a large number of components that make up the announcement today. Obviously Global Connect being a core element of that. We would not be able to do Global Connect in isolation; we wouldn't be opening up at the pace we wish to, the relationships, the number of CE retailers around the world without our partnership with Best Buy.

And going to do that together, I think, combines the very best of our skills to enable us to do that at the pace which we both aspire to do it. So that is a key component of us finding a solution going forward. As Charles alluded to, in finding an amicable solution to the situation where clearly Brian and his team, want to extend the broader connected space in their own stores, as indeed they should do.

It's very much, as we know, the space where consumers are looking to CE retailers to embrace and we should enable Brian and his team to do just that, which I think this transaction clearly does.

At the same time, we've got to make sure we get fair market value and clearly for our own contract, our own assets there which we obviously believe we have done today.

But the components of that are both the value of the contract, the agreement to go forward on Global Connect. Obviously bear in mind the Chinese opportunity within the historic agreement, and obviously we maintain that as indeed we have with the Mexican contract as well.

On top of which though, there are other components which we have discussed as part of the overall transaction.

So headline numbers you'll be familiar with, around $1.3b being paid in cash. I'll come onto the timing of that, but obviously paid up on our own shareholder approval process. On top of which we have a consultancy arrangement, particularly for us to continue to keep a watching and hopefully assisting eye onto the US market. Five years' worth of GBP5m, that's coming 100% into Carphone Group PLC, rather actually than into the Global Connect. It's very much us embracing a concept of keeping a helpful, a watchful eye on the US business and having the opportunity to get the very best out of that business as we roll out into some of the Global Connect opportunities.

I think we've come up with a structure which hopefully is what our shareholders would hope, to get it into a tax efficient structure. So we've got into a structure which allows us to get those monies directly up into PLC to distribute to our shareholders without any corporation tax or indeed capital gains tax leakage, which obviously was a key aim for us in terms of the construct of the transaction.

On top of that, I think given the complexity that everyone understands in terms of joint ventures, both parties sat down and talked about where does this actually take us in the future, we've obviously resolved what we're doing in the US, but we still have a very significant joint venture in Europe. And we also have an ongoing and hopefully rapidly building joint venture arrangement under the phrase Global Connect.

I think what both shareholders really understand is that it is useful for us to have touch points where we sit down and assess actually the direction we're going in, what are both parties' perspectives. And where is, indeed the best ownership for those relevant assets to sit longer term.

And I think what we put in place today is a series of options and optionalities. The first one being that after three years, i.e. March 2015, Best Buy themselves have a call option to buy the other half of the European business at fair market value. If they decide that is not something -- something they do not wish to proceed with at that point in time, we have a mechanic at the same just after that, to effectively we buy their 50% at a 10% discount to fair market value.

What that does and what that event does in either case, is it triggers a position on the Global contract, albeit four years after that time. So effectively seven years from today where we're in a position where we'll be able to put and certainly in the case where they own Europe an opportunity to call the Global Connect contract. Actually after two further years, after five years the opportunity similarly for Best Buy to call the China and Mexico option.

If we've called Europe, we obviously -- we have an opportunity to put Global Connect, there is no subsequent call by Best Buy.

So it gives us, I think, some clarity around the longer-term ownership. Clearly some optionality in terms of where that sits for both sets of shareholders. What it does do, I think, is really focus our mind here in the common interests of both shareholders really to drive European business and get some real value accretion in there. I think both shareholders would agree that looking at the value of our European business today is clearly not where we both aspired. It's certainly not what reflects the true underlying value of that business and that is something clearly we're going to work very hard to achieve over the next three years to both give it the growth rate as I alluded to earlier, around space and productivity, but also to generate the underlying productivity of our stores and profitability of our overall business.

So a lot of focus on Europe now and I think in terms of that, the decision around Big Box actually enables our management team to be very focused on that in delivering the Connected World.

So it gives a lot of focus for the entire team for the next three years and beyond to focus on Europe and it gives some real clarity around the ultimate long-term ownership of the Global Connect business.

What does that mean in terms of the overall deal? Clearly the sums work out around 170p per share to be returned to our shareholders in a time period that I'll come onto in the next slide or two, just in terms of the actual time, but probably mid to late January.

The Global Connect agreement as I just referred to, the governance around both the European business and, I think, Global Connect is a lot clearer than it was historically. We tried to take away as I call the corporate governance and work really hard to put in place what I call the efficient operational governance. So we just run the businesses better, allow the management teams to get on and operate and drive the agenda which we set out for them. And I think we've taken away, I think if I can call it, some of the bureaucratic red tape we might have put in place at the outset in natural joint venture language, and allowed it now to have some freedom to get on and meet its medium- and long-term aspirations.

And we've also taken the opportunity between the shareholders to introduce a formal dividend policy within Best Buy Europe. I know certainly a lot of our shareholders are always concerned in the past that we had income streams from Best Buy Mobile alongside the European business, and the fact that they were trapped within the Best Buy Europe venture with no clarity of a dividend structure. Clearly what we've introduced today is a structure that actually enables there to be a formal dividend policy out of that business, which I think hopefully in the interests of both shareholders and all our independent shareholders.

In terms of timing, it clearly does require CPW shareholder approval. Aiming to get the circular for Class 1 transaction out to our shareholders by very early January. In which case under the 14 day time period we'd look to have the EGM probably just prior to our trading statement which I think is currently programmed for January 24.

So we'd hope to have had our EGM prior to that and then obviously cash distribution through the B Share Scheme that you'll be familiar with towards the end of January, early February is our current (inaudible) time frame. So hopefully that's very clear.

Just before I hand you over to Nigel, I thought it was just worth then reflecting on the sum of the parts for the Carphone Warehouse shareholders and what I think we've been aspiring to do for you from the day we de-merged out from the Talk Talk business into the Carphone business demerger, I think we really set out on a journey to try and realize value for the individual assets. And we've had a discussion with a number of you around that sum of the parts and how we realize value over time.

I think what today does is clearly crystallize an awful lot of value, from a contract which over the four years ago from starting, we've generated over GBP1b of cash from a capital light investment contract that we put into the US, so we think is very significant value creation.

Putting that then to one side and assuming therefore the GBP1.70 distribution, it's basically half our stock price today, what is the rest of our business reflecting. I think just putting Europe to one side, clearly the Virgin Mobile asset we would say has a lot of significant number -- inherent value within it.

I think given its growth rate a number of its other, I think, key components in the French market value, opportunity there is very substantial. You'll have your own view on the underlying number, but I think it's a very substantial asset for us and certainly going forward under the new group we'll obviously get more and more focus in terms of its underlying value as it comes with obviously a larger percentage of the overall Group.

Cash and loans of circa GBP200m, so circa GBP0.40 of value within our stock price.

Global Connect, well, I do appreciate outside the Consultancy Agreement it's going to be very hard for people to jump onto values for that. And as Charles alluded to it took us some time after we launched in the US for people to really understand or attribute any value to those businesses.

Our job clearly is to make sure people can understand the underlying value of what we intend to do in China with our partners, but also then subsequent agreements as we come back to you and give you some further insight as to the scale and size of those opportunities.

Putting that to one side, clearly it leaves a balance of value; you'll all do your own math between various numbers between GBP300m and GBP400m of value attributed to our European business. And clearly given historic valuations which we think more accurately reflect that value, we've got a lot of work to do to get people to understand how we can drive the value of that and the best thing we can do is deliver that through earnings growth.

So we're very focused on how we present and get people to understand the sum of the parts of the business. We intend to do that a lot over the course of the next three or four months and demonstrate some of those opportunities to you more clearly.

With that I will hand you over to Nigel who is going to run through the interim results in a little bit more detail and some of the revised outlook numbers.

Thank you very much, Roger. There's obviously been a lot of new news today and so in the interests of allowing plenty of time for Q&A I'll keep this relatively brief.

There's a more comprehensive set of H1 financials and guidance in the appendices, and obviously if people have follow-up questions I'll be happy to arrange calls or meetings after this.

So starting with H1 earnings. Clearly at bottom line level, a 78% drop in EPS, it belies so much the very solid performance from the continuing businesses in particular.

CPW Europe, I think we've set out as clearly as we could back in June, our expectations for H1. So the impact on the UK market of 18 to 24 month contracts, which we anticipated would have an impact of around GBP25m and really what we were expecting has been seen in the market and in our figures.

On top of that there was the GBP10m downside effect of the finalization of the migration from the service provider business in Germany, which had its principle impact in H1. And alongside that you'll see there was a GBP4m reorganization cost in Germany.

So in the light of those two factors, we really feel that H1 earnings are very much in line with our expectations and I'll come onto it in more detail. But for that reason, we're reiterating full-year guidance.

The US business as Roger previously mentioned, obviously had a more subdued Q2, reflecting the product cycle and it's in that context that the relatively modest growth for H1 has to be understood.

Best Buy UK, clearly, a substantial increase in losses year on year, reflecting the further investment in driving forward to the increased number of stores. And, as you'll understand, that level of loss is not something that we can sustain and that's obviously reflected in the decision to close.

Virgin had a very successful first half, adding 88,000 customers to the base to take it through the 2m mark, which is -- was originally targeted, I think, for 2013, so ahead of schedule on that. Clearly, the short-term investment in acquisition dampened short-term earnings, but obviously enhances longer-term and the value of the business as a whole. And, finally, we intend to pay a dividend of 1.75p in December, which is in line with the policy that we initiated last year, of approximately 3 times' cover.

So looking at Best Buy Europe in slightly more detail, we saw a drop in revenues of around 5%, again, very much in line with expectations. So the two things driving that are the like-for-like number. So we had a like-for-like negative of 3.9%, which was a factor of the 24-month contract issue again and a relatively weak prepay market. And then on top of that, again, it's the German migration from the service provider to retail business which had a negative impact of around GBP60m in H1.

The gross margin percentage is distorted somewhat by Best Buy UK, which had an increase in revenue year on year. Alongside its very low sales margins it invested very heavily in marketing and, consequently, suppressed the overall figure. The underlying CPW Europe margin was relatively robust in H1, as expected. We saw the impact of the loss of UK postpay volumes, which are the highest-margin connections that we have. But looking out for the rest of the year we're confident in the margin outlook and, so, don't see that as something to be concerned about.

In terms of OpEx, again, significant year-on-year investment in Best Buy UK and the reorganization costs that I mentioned in Germany. Offsetting that has been the reduction in service provider costs in Germany and also ongoing cost efficiency programs throughout the rest of the business.

Moving on to Virgin, as Roger mentioned, very strong revenue growth, 17% at constant currency, which is outside of our full-year guidance range. And that's really a reflection of the fact that our acquisition profile last year was very strongly weighted to H2 and, therefore, the comps are relatively easier in H1. In terms of EBIT, if you back out the improvement in acquisitions year on year, so, last year we saw a reduction of 33,000, this year, an uplift of 88,000 in net adds. If you normalize that, that's worth about GBP17m. And so that would take us to the mid 20's EBIT levels that we would be aspiring to on a full-year basis. And so that's just a function of the short-term acquisition profile.

Moving on to Best Buy Europe cash flow, I suppose the most striking thing in this is the incremental absorption of working capital year on year. And so in order to avoid any undue alarm on this I just wanted to explain what was behind that. There are really two things.

One is a higher level of stock year on year, by approximately GBP30m, the largest part of which is Best Buy UK, which will, obviously, unwind in H2. And then the second is really a function of the weekly retail calendar that we use, which just means that the month-end date falls on a different day each month. It just meant that this time around some of the payments that we would have ordinary -- we would have previously received in this September period, actually, fell into October, so, again, timing difference. It's not something that we're concerned about and so we maintain the full-year guidance for working capital that we set out in June.

CapEx obviously increasing year on year, very much in line with guidance, which is obviously investment in the Wireless World format.

So moving onto a slightly more detailed analysis of full-year guidance, obviously, the transactions announced today have a fundamental effect on the earnings outlook overall, with the termination of Best Buy Mobile profits and the termination of losses associated with Best Buy UK. For the continuing businesses we're maintaining guidance at an EBIT level throughout. As Roger mentioned, when we stood up in June we explained that the principal sensitivity in terms of our guidance ranged from GBP135m to GBP150m was the prepay category at Christmas. As we look forward today we don't have a great deal of optimism about prepay outperforming and, for that reason, we would probably imagine we'd be at the lower end of the range.

Virgin Mobile France we'd expect to be exactly where we thought we would, despite the strong customer acquisition in the first half. And so for the continuing businesses -- business I guess we need to start being more focused on the EPS for those businesses. And so what we're looking at for this year is we think between 11.5p and 12p.

For Best Buy UK we're anticipating, as Roger mentioned, GBP25m to GBP30m of operating losses through to closure.

And then the closure costs, just to analyze those in slightly more detail. Cash costs of GBP56m to GBP75m. The annual rent bill is around GBP9.5m and, so, if you put it in intensive -- incentive terms that is slightly over four years. The thing to bear in mind is that as we hold onto those stores we also have rates and service charges, so it's very much in our interest to try and get rid of these leases as soon as we can, and that will obviously be the plan from today.

Again, Roger mentioned the fact that, having invested a significant amount in recruiting and training some really high-quality people who have skills that could be redeployed elsewhere in the business, there's an extended period to try and achieve that redeployment, which is slightly more costly than it could be if we took a different approach but, certainly, worthwhile in the medium term.

And then the other elements are stock disposal costs, contract exit costs, and just for completeness we've stated these numbers net of tax. To put that in context, there's no tax relief on lease incentives or contract exits so, frankly, it's not a very big number. But when we're trying to look at the total cash cost of getting out of the business that's the relevant number to use. And then the asset write-downs is just the stores and the IT investment that we've made over the past three years.

So I appreciate that this was quite a rapid run through what is probably a relatively complex area, so I'll just reiterate if people want calls or meetings after this I'd be very, very happy to do that. But I don't want to reduce the time to deal with questions.

So, with that, I'll hand back to Roger for Q&A.

We'll take them from here for now, shall we? So --

Hello. With regards to the Global Connect business, could you say something on -- the economics were flashed up at 20% profit share and 50% profit share. Does that include loss share if those businesses start losing money? And on the 50% for the territories outside Mexico and China, where your partner has existing retail footprints, could you say a little about -- the 50% presumably is net of the -- is the profit made by your business, which will be net of the contribution you have to make to the third-party retailer. And how much is that? Is that all right?

Perfect. I think, basically, in China and Mexico it will replicate very much what we've got in Best Buy Mobile in the US. We're effectively going to have 20% of overall incremental EVA, which, actually, is the same effective position we have in the US. So I know you think it's half of the half, i.e., 25%, but there's a trigger point where we -- the profit builds up and, therefore, it was a -- it was through various steps of percentages. So we've eradicated that for the same of simplicity and it'll be 20% of incremental EVA.

And it's fair to say in China Best Buy haven't yet launched a significant mobile or connected strategy, so initially EVA is relatively small to start with. And we get 20% of all incremental. So that's the economics. Then the similar economic situation will be in Mexico as well.

Obviously, elsewhere we go together as a joint entity, shared 50/50 Best Buy and Carphone Group PLC, so it doesn't actually come direct into Best Buy Europe, but you picture it as a straight 50/50 between the two of us.

Then we'll do whatever deal we will with various other retailers, CE retailers or others in various markets. So if we can negotiate the position where we get half the total economics incrementally, then we'll just benefit from that equally between us. So until we've finalized those negotiations we won't know. Obviously, we'll aspire to get as large a share as we practically can in terms of those arrangements and other key components, such as capital levels and capital investment are obviously key.

And I think if we're going in with a substantial retailer in another market into their existing stores, then it sits very logically to be more akin to a profit-sharing arrangement than it does to start setting up a business where you're pulling out part of their assets into different entities and whatever. So a profit-sharing agreement would tend to imply a profit -- a capital-light arrangement, so you should imagine a similar again to Best Buy Mobile.

If there is a loss in the beginning for whatever reason, are you liable for that or not?

Again to be negotiated in various positions. So in the US contract it actually -- I think it did go back marginally in year one. We didn't actually share in that reduction in EVA under that particular contract, but it was soon back into profit anyway, so it was a rather irrelevant clause. It will just depend on the negotiations. If the size is big enough, the scale and the opportunity is big enough, clearly, we've no fear in investing in a loss period if that's what it takes. I don't actually think that'll be very relevant. I think we can hit the ground running.

Andy?

Yes, just following on from that, could you give us an update on Germany and what's going on there and where the restructuring charge was? And looking at the markets where a Best Buy Mobile-type model might work well, isn't Germany top of the list if you could strike up a joint venture there?

Okay, thank you. I think in terms of the -- first of all, the reorg cost is very simple. That's moving from a service-provision business that, as you know, we got out of at the end of last year and moved into a purer retail business and that's -- part of that transition of us, obviously, reducing quite substantially the headcount around the historic SP business to just being a sole retail business. So those were those one-off costs.

I think in a number of European markets the opportunity we need to look at --- so I'm talking mainland European markets. We need to see how we can establish scale quickly and effectively and efficiently going forward to enhance our profitability. And these are part of the ideas we'd like to come back to talk to you all about over time. But we certainly have aspirations to -- (inaudible) the old cliche is get in there and have a serious business or you shouldn't be in there at all. And I think in a number of European markets I think we are sub-scale and we'd like to certainly embrace this broader connectedF product, a broader, more encompassing retail proposition.

How we can do that and who we can do that with is something we're going to debate long and hard. And some of the ideas that you can all think about probably aren't lost on us. And we'll have to work out what works well for us and, potentially, other partners. So, yes, it's something we could explore. But in Germany we continue to be sub-scale. As we said, we're going to lose year on year GBP10m, worse than we were for last year, and we know that's not acceptable going forward, so we'll continue to explore opportunities to make sure that's not a recurring loss. I think there's, as I say, other European markets where we need to get more scale as well.

Sorry. Ben, then on to Richard.

Thanks, just a question on the Global Connect JV and the mention of fair value assessment for Best Buy Europe. How will that be calculated?

Yes, that's -- obviously, it's a reasonably well-trodden path around these sort of arrangements. So I think the contract mechanics are pretty clear. We try and work -- if one party does want to call or put, the two can obviously sit down and try and agree a value; ideal if that was the case. If not, the mechanics flow through a normal one of appointed bankers to do it independently and then, ultimately, being determined by a third part if needed. So I think it's a very tight process through time so it doesn't drag on too long and in any way disrupt the businesses. So it's quite a rapid process to get to that situation.

A very different question on Virgin Mobile France. Could you just comment on your view of the timing for a disposal and also your -- how your view of valuation compares to current consensus?

Okay. I think we've been very open in saying all along in conjunction with our shareholders in Virgin Group. I think we've both gone into it as financial investors with the intention of making a healthy return on our capital invested and I think we're certainly on course to do that. That will always be determined by other factors in terms of when we think the optimal moment is. And I think for now I think the most important thing the business can focus on is, obviously, growth, which I think we're demonstrating exceptionally well.

And the other key component really is rolling out this full MVNO platform. That, I think, gives the business both better inherent underlying margins and value in the short term, but in terms of its underlying play out in the market, clearly, it gives enhanced opportunities around the valuation for any party buying it who'd wish to transfer the -- either the exist -- the wholesale traffic that's already not on their network or the entire you could transfer very much easier under a full MVNO contract. So it has a number of inherent values and propositions to the customer, which is really the fundamental day-to-day reason for doing it, but there are more strategic reasons for doing it as well.

Obviously, we're embracing on that path. That means there's a number of months and, potentially, two years to get all your customers onto a full MVNO and we're obviously embarking on that now. So as and when we get a material element onto the actual structure, then, clearly, both shareholders can view what is the most strategic moment in time to realize our values. So that's a process we're going through.

As to what it's worth, you all know the wholesale revenues on there. You can work out what that could ultimately be worth to somebody else. And that's clearly how we would see the value.

Thanks. Yes, just a couple on the Big Box UK exit, please. As I understand it, the intention is to close it by the end of this calendar year. I was just wondering why you're closing it by the end of this year, not giving yourself maybe a bit more time to clear the inventory going forward.

We're obviously optimistic that we'll be -- get of a lot of the inventory across the stores by the run up to Christmas. Obviously, you then face the dilemma if you're going to keep going after that are you going to have a credible sale proposition; you need some product in your stores. So we don't intend to stock it up for clearance sales, post Christmas.

So I think, basically, we'll run it through. I guess we'll see just what happens in various stores and whether they all close on exactly the same day or not we'll work that out. If we've got enough stock to put into one store, for example, post Christmas, we would do that, I guess. So I think we'll just see how the stock winds down over the course of the next couple of months, so a very practical, day-to-day management of that.

Okay, thanks. And, as you assign the leases or exit from the leases going forward, could there still be a contingent liability there? Are these likely to be reversionary leases that you're liable for?

That depends who we exit to, doesn't it? So, clearly, we're very conscious of that, very aware of the risks of seeing a lease come back onto you. So it clearly depends who we would sell it onto and being comfortable that that is somebody who has the financial wherewithal to secure the remaining tenure of the lease.

Okay, thanks. And just if I could just sneak one in on China, completely different subject, I wonder if you could just give some initial thoughts on the structure of that market. Is that -- in terms of prepay versus postpay, Five Star's market share at the moment, that kind of thing, just some general background.

I think from a market dynamic clearly evolving at a very rapid pace. I think still predominantly prepay and ARPUs relatively low compared to what we're seeing in, obviously, Western Europe and North America. So I think undoubtedly it's going to be a volume market and, therefore, we should imagine quite a lot into the prepay segment. I think in terms of Five Star's current market share across the overall Chinese market, pretty small at this stage. And we do understand collectively as partners how we need to accelerate that a lot over the next two or three years.

And again, coming back to the point, we've always talked about ourselves and, indeed, our partners in the US about getting critical mass very quickly. We've talked about this 5% to 10% being very important points in terms of your relationship with the network. So there's absolutely no point in launching in China and slowly creeping up to 1% or whatever. You've got to have aspirations to go relatively fast over time and that's something which I think we're very joined up in. So we'll come back and give you much more light on it. I appreciate it's just a flavor for today, but we will come back and give you some light around the pace of rollout and the store numbers over time.

Okay, thanks.

Thanks, Geoff Ruddell at Morgan Stanley, a couple of questions, if I may. The first one is, if there is a -- if you've sold out in North America because you were feeling it was damaging the customer proposition in terms of how you split the category and so on, why isn't that an issue in China as well?

I think for a -- I hope in terms of the -- two reasons. I think, for a start, the contract in China and Mexico is actually across the whole connected space, so it's not just for Mobile.

So you get the share of the tablets, etc. as well?

Yes, exactly. So we've overcome that proposition point. I think -- I hope -- if I could repeat Brian's comment to me over the last few months around the importance of keeping us in China and Mexico is I think, hopefully, we'll bring certain skills to our proposition to clearly get something off the ground in terms of what we've achieved in Europe. I think we've got certain characteristics within some of our management team that can go in there very quickly, get the thing to market exceptionally quickly and I think that's really our role. And we see that as something we can achieve.

I didn't do that. It feels like the lights should go out and we can go and get some sleep.

Between the next five to seven years we believe we can run very quickly and really drive the opportunity. And I think we've got certain characteristics within Carphone that can really help Best Buy do that and I think -- I know that's their belief. And clearly they bring spades of experience into that market which -- we wouldn't be able to go there on our own, so --

And then the other question was could you afford to buy out the other half of your core retail business if you still owned the MVNO?

Clearly, that'd be something we'd discuss at the time with both our debt partners and our equity partners in terms of how -- our shareholders in terms of how we would do that and work out, I guess, what the value could be at the time and how we'd structure it. So, yes --

So you see the point that, presumably, you would think it's going to be worth, I don't know, GBP500m, GBP600m, something like that, maybe more? You're busy returning GBP800m to shareholders now.

Yes, but I think -- I know our shareholders would want that GBP800m now. Tell me if you don't.

We need to look to your left (multiple speakers).

I wasn't thinking of him, actually. You want it?

I think -- I don't think -- if the business has done -- if the European business performs over the next three years as we aspire, I think coming back to our shareholders and saying -- if it's the right thing to do, Best Buy don't want to exercise their call, but we believe it's the right thing for us to do, then I would hope we could go to the market and raise suitable elements, suitable quantities of debt and equity to do that. I'd certainly hope we could do that.

Okay, thanks.

Good afternoon. Assad Malic, Credit Suisse, three questions. Firstly, on -- just coming back to Global Connect in terms of the margins, when you look at the US in terms of the market dynamics and then you look at, say, China, for example, in terms of profit per connection -- and I understand it is very early days in terms of mix and economics, but would you expect to achieve similar margins, say, on a store-within-a-store concept that you're achieving in the US?

And the second question, actually, coming back to CPW Europe, again, there's been a lot of distortion to the margin over time because of what's happened. In Germany we've got the Wireless World refits coming through. What do you think is a normalized margin that we should be looking at for that business going forward?

And the last question, just on Big Box in terms of the some of clearance that you're planning to do into Christmas, have you had discussions with other retailers in terms of negotiations over the stock. And also have you had negotiations with supplier about taking stock back as well?

Okay, I'll try and remember those three. Margins in China, I think, very early days. Obviously, we've got a team down there working very hard through this, studying ARPUs, looking at projected ARPUs going forward, understanding, therefore, what values we should aspire to make on every connection, as I alluded to earlier to Richard or Ben's question. It was around predominantly a prepay market. We obviously need to see whether we can change that, if that's what the market wants in terms of how the operators see the proposition developing are all weak and, therefore, play in doing that.

My gut feeling is this is a high-volume market. Interesting, the gentlemen we sent down to run it used to run our Irish business, which, for those of you who study [that] closely, we always put up as a very high prepay market. He had the highest number of connections per store across the entire Group at any point in time, so we have a guy down there who knows how to shift a lot of prepay with the network relationships it'd certainly be Stephen. So I think we've -- we need to be very conscious the Chinese mobile market is going to change a lot, I think, over the next five, 10 years and we need to shape our business accordingly. I can't give you, Assad, today categoric views on margins or AMPUs to us per connection, but we'll come back and give you more light on it.

Margins across Europe, I think in terms of the figures that Nigel alluded to, held up strongly in H1, as they -- indeed, they grew, if you recall, last year. I think it was like 50 bps last year. We said back in June we see those remaining relatively flat this year. In fact, I think we're a few percentage down in H1 because of the postpay dynamic you're familiar with. We see that picking up in H2 and, therefore, I see that number -- mid 29s mark seems to be, early 30s, as a margin mix and, within that, you've got some dealer -- you've obviously got some dealer margin within that, which is slightly softening from the underlying Small Box margins. But that seems to be broadly where we're staying and we're very confident of that margin going forward.

The point I made around prepay is quite important in that context as well as seeing volumes drop off for the reasons that I mentioned. The underlying cash margin per prepay connection has grown quite substantially over the last year and so that really comes back to the quality role we're trying to play with the networks in tandem.

(inaudible -- microphone inaccessible) more about the operating margin, particularly if you are connecting across a wide range of devices and, obviously, taking more ARPU share across a wider range of devices as well.

Yes. So I think the broadening of the product categories really defines like-for-like growth that we can achieve in the medium term. And I think that's something which, obviously -- this is hardly a normalized year for us, given the shift in the 18- and 24-month contract impact. But I think, putting that to one side, our growth in tablets that we've seen across Europe and our aspirations around that, the broadening of the accessory ranging, all lead us to driving higher like-for-like revenues. I think the absolute margin percentage we make on those won't be markedly different, but that does give some leverage to the fixed cost base and, therefore, in turn, playing your way through the P&L should drive a higher EBIT margin in turn as well.

There's just a last question on the stock in Big Box.

Stock in Big Box. Yes, we've got some stock in Big Box.

Whether you've been successful in trying to get some of the suppliers to take any stock back, or whether you had --

I think, being serious now, we're obviously in conversation with a number of suppliers around what we'd previously alluded to. Obviously, we're being careful not to order too much in advance in preparation for the announcement today as we've been going through that process. But we have been running a business as usual, as you would expect, until now. So try and make sure we certainly haven't over-ordered beyond our current expectation, so it's being just carefully managed.

Where we've got common relationships, i.e., relationships that continue within the Carphone arena, it's obviously easier for us to leverage those and we'll be similarly leveraging our relationship that Best Buy had with certain suppliers to make sure we mitigate any cost.

Okay, thank you.

Hello, Chris Chaviaras from Barclays Capital. Three questions from me, if I may, but they're shorter.

Excellent, okay.

First -- the first one on China again. How many pilot stores, if you can give away, are you going to drive the mobile offering at?

And then you talk about aggressive store expansion there over the five years. I guess it's early days to put the number of stores behind every year, but any indication, low digits, double digits, anything that could help us out?

In terms of pilot, just be clear that neither Brian or I have any doubt that we're going to make this a huge success in China. Clearly, operationally you're going to open a few, as we did within the US market. If you recall then, we opened, I think from memory, 3% or 4% of the Best Buy estate, for a store-within-a-store, to start with, 30 or 40 of them. And we tried different things and worked out what -- how the proposition would best work. Once we got comfortable with that we went at one hell of a pace, from memory, rolling it out across all the stores.

So you should imagine a similar concept of trying different things in a number of stores. Whether that's 10 or 15, we'll still be finalizing into -- through the next couple of months. But we will do -- we will take a typical perspective on that and try different things in different locations. And, no, I'm not going to sit down and give you a number for the next five years. Clearly, there's a number of different things -- number of different ways in which we could achieve that, as you can imagine, and we'll work on those and come back to you.

My second -- thank you for that. And my second question would be on Tablets. Back in June you had given a pretty detailed presentation on what you want to do with tablets in the combined offering with the smartphones. Any early indications of how this is working? Do you see customers actually buying the smartphone with a free Tablet in there? And any thoughts of when you will actually realize some gross profit there, instead of giving that as a free gift?

Well, maybe just to start on the last big of that, so we do make money even when we're giving it as a free gift. We're quite -- that's probably the course of our business, I guess. It's part of a bundle proposition. So it does enhance the underlying profitability on a postpay connection if we're tethering a tablet as well, because it's a higher ARPU connection. So we'll make more money out of those propositions.

And, as you can see, just to get other postpay connections we're offering giving other free gifts with a postpay connection already built into the economics. So a tablet, therefore, with a higher ARPU would clearly generate more gross profit for us if the cost of the tablet's equivalent to the other gift.

So there's a range of things going on in the tablet space. There is clearly an iPad dominance still worldwide and that's no different in our markets as well. The question, therefore, is a lot of other suppliers clearly trying to break into that space, what is a very clearly -- a very proven story came out of the last few months across Europe is if the price point is markedly different to the market leader, then you can really make substantial penetration. So in various European markets we've launched some cheaper-end products out there and they've sold very successfully.

Clearly, there is a challenge from some of our other suppliers who are sitting looking at price points more akin at the high end, and I think that's the challenge for people to break in at this stage. A number of those clearly have got aspirations and are launching products with various disputes going around patents and other things. So, yes, I think this marketplace is just going to expand very, very rapidly into multiple propositions, certain products tethered, others purely connected devices, others that are WiFi only at different pricing points. And it's just a market that's going through that natural evolution of working out which products should sit where at what price. And I don't think that's really settled down, actually, in the last six months.

Our own experience is we're making a lot of traction in there. Our volumes are growing quite significantly in the tablet space. Yes, I think when we stand up next year and give you guidance for the following year we'll be probably breaking out here's the number of tablets that we're aspiring to sell into FY '13 once we've just got our proposition clear in all the markets. And also the Wireless stores and the volumes of those I think will enhance that. So still as exciting around that space as we always have been.

Thank you. And my last one on the Big Box, what is the base assumption you make for the leases in order to come up with a GBP40m cost? Do you assume that you will sub-lease 50% of the stores? Anything there? And then --

Average around about four years, so -- in terms of get-out costs. So, as always, I said five or six we'll probably get out within -- very quickly because of the high demand and then you're going to have five or six which, we've assumed, take a number of years' costs to get out, either being a capital contribution, assign the lease back to the landlord, or whatever arrangements we come to.

And with Big Box out of the way now, what is the CapEx guidance for the full year?

I think we'll get back to a more traditional number for Carphone, which I think we actually guided separately. Nigel, GBP70m, GBP80m?

Yes, I think we're a little bit out this year, so about GBP85m (multiple speakers) investment in Wireless World.

So rolling out more of the Wireless Worlds will clearly bring it up, but we'll be in line with that [best] guidance. So I think half year is around about GBP40m, early 40s, so you should expect a similar run rate whilst we're rolling out the Wireless stores.

Thank you very much.

A final question?

Thanks. On Wireless World you're talking about rolling that out across the entire estate now, am I correct? Is that what you were saying today?

Well, our guidance was for this year to get to 350 to 400 by the end of March. And the point I was making earlier is we're rolling out about eight a week just in the UK at the moment and a number -- I think it's slightly less than that across Europe. But if we extrapolate that forward now we're very confident of getting to our desired range.

Okay. And can you just refresh us on the economics of doing that, the gross uplift first or --?

Yes. We're looking at gross margin up around about -- around 20%, but at the same time, obviously, we have some costs build within that as well. So obviously and typically we've got an extra employee, be it Geek Squad or whoever, into the stores, so it translates to around about a two-year payback on what ranges to an -- [118,000] I think was our guidance CapEx. Actually, probably it varies, obviously, to the size of the store. We're getting more efficient. It's probably come down to the lower end of that. And certainly as we now getting towards some of the smaller stores and do those, it'll certainly bring that down. But it will give you a good -- pretty easy visibility of a two-year, 18-month payback.

Okay, well, if there's no further questions, just to say thank you very much indeed for coming along in the afternoon at such short notice. And I obviously look forward to seeing you all very soon. Many thanks.