Carphone may spin off Talk Talk

THE RUMOUR mill was working overtime this weekend on the possibility that Carphone Warehouse may do something about spinning off its broadband/telephony division (Talk Talk) as it reports interim figures later this week.

One publication has put a value of £900 million on the division if it were to be spun off. Obviously with the current economic climate the possible demerger will happen later rather than sooner. But is it a good idea?

The City bods are arguing that its mobile phone business and its broadband business are already operating like separate companies and so splitting the two would create two companies worth more than the single one.

Nice idea, but the INQ is seeing shades of Vodafone and O2 here. Racal offloaded Vodafone which went on to become the UK's biggest company and BT offloaded Cellnet and lived to regret the success of the renamed O2.

The one thing which phone companies do is guarantee a steady cash flow. Whereas the Carphone's Warehouse has just embarked on a risky strategy of putting its retail business into a joint venture with Best Buy, the US based chain.

Still, it could be good news for long-suffering Talk Talk customers whose broadband connections have a habit of disappearing on a regular basis. Oops. There it goes. Have to reboot the router again.

It will be interesting to see what happens over the Xmas season. With the economy the way it is, the INQ can see Santa Claus signing many people up to 18 month contracts rather than going for the prepaid option.

And with prepaid you don't have a guaranteed regular income. µ