Reputation Check: Carphone faces its biggest crisis

In the wake of its AOL UK purchase and split with Vodafone, Alex Black analyses the reputation of Carphone Warehouse.

First came the positive news: Carphone Warehouse had pulled off a £370m deal to buy AOL UK. The next day came the bad news: Vodafone, with Charles Dunstone since he launched Carphone in 1989, announced it was to defect to rival Phones4U.

Carphone acted quickly. It began by seeking assurance from other mobile phone operators that they would not follow Vodafone's lead. Then CEO Andrew Harrison went on the attack: the deal that Vodafone had demanded required Carphone to guarantee 35,000 sales a month regardless of terms for customers, and went ‘against everything we stand for', Harrison said. But some reputation damage was done.

‘Purely a UK issue'
Carphone head of comms Vanessa Godsal plays down the Vodafone pullout. ‘It is purely a UK issue and we still have an excellent partnership with it across Europe. What is more important to our customers is that they continue to get impartial advice and great deals.'

Coverage of the AOL purchase was more positive, but parallels were drawn to the customer-service nightmares experienced by Carphone's TalkTalk broadband customers this summer, for which it underestimated demand. The Times, meanwhile, noted: ‘The threat to Carphone's retail distribution business comes as it seeks to put behind it the chaos from its free broadband offering.'

Godsal says the firm has always been open about the fact that demand was ‘overwhelming' when it launched free broadband in April, and the firm has since doubled its call centre staffing.

Carphone's reputation with consumers still pips that of Phones4U (see charts), but retained agencies Freud Communications and Citigate Dewe Rogerson still have work to do.

Analysis 1: the PR professional's view

Michael WADLEY, a former senior comms manager at BT, is now a partner at Wadley & Co Communications:

‘Once considered by the media as a bit of a feisty underdog, Carphone Warehouse has risen to become one of telecoms big-boys - but is now experiencing some of the growing pains involved in becoming a major player.

Thanks to the use of prized PR asset CEO Charles Dunstone, the company has done pretty well in coping with the aftermath of its "free" broadband initiative.

‘Carphone must resist the temptation for a pub car-park punch-up. Instead, it needs to focus on communicating the pure, business-related facts of the Vodafone split. For example, analysts seem to have got the message that Vodafone represents just ten per cent of Carphone's mobile sales.

‘Overall, Carphone's corporate communications needs to build from the maverick mindset of yesteryear, highly successful for its time, toward a new era of gravitas that reflects the company's ascending status.'

Analysis 2: the financial journalist's view

Paul DURMAN, financial editor, Sunday Times:

‘Charles Dunstone has bought his company a lot of protection. His availability - and the sense that, despite his wealth, he's a regular bloke - has enhanced Carphone's credibility and shielded it from flak. The shambolic customer service that accompanied the launch of Talk Talk's "free" broadband offer has been criticised, but without the venom that would have been directed at NTL or BT. Dunstone's public mea culpa about this "nightmare" helped to draw the sting.

‘The Vodafone row has weakened Carphone's claims to impartiality across the mobile market. Its PR response smacked of desperation - accusing Vodafone of trying to force uncompetitive deals on customers (how?) and attacking Phones4U for unprincipled behaviour. Its emotional email to staff from Carphone UK boss Andrew Harrison was ridiculous.

‘Vodafone's move has highlighted Carphone's vulnerability: it is reliant on the mobile network operators that are fed up paying high commissions for customers who move on after a year.'

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