Political and legal factors

In recent years since the tech bubble burst in the late 90's, share prices in general have fallen. Technology companies have taken the full brunt of these sharp declines in share prices. This report will analyse a company within this sector that has continued to grow. This company, the Carphone Warehouse has continued to profit despite a rapid fall in its share price. I will conclude from my results if Carphone Warehouse will at the moment be a worthwhile investment.

PEST Analysis Political and legal factors

Mobile phones in recent years have become increasingly popular, this has been partly due to the opening up of the industry through privatisation and the sales of operating licences to the private sector. The cut throat competition in the industry has caused the continued decline in prices throughout the 90's, which has opened the market in mobile phones for personal and social use. Whereas before mobile phones would only be economically viable for business use. In addition to competition, the government watchdog for the telecommunication industry as a whole (oftel) also ensures fair practice within the industry.

Economic factor's

In recent years economic growth has slowed, mainly due to a global downturn in the world economy. The U.K, compares favourably to our European counterparts in terms of economic growth. Certain sectors within the economy have been more affected by this downturn than others. Telecommunication companies share prices have seen rapid decline compared with their prices in the late 90's. This can be seen as a knock on effect of the dot.com bubble burst, although it is said that share prices today represent the actual value of the company better as the share price before were over inflated and a price adjustment was necessary.

Inflation is currently at just over 2% which is within the government target of 2.5%. Interest rate are at present 4% and maybe changed to 3 3/4 % by the end of the week. This change reflects the need for a boost in the consumer expenditure to try to push up growth rates. A drop in the base rate by 1/4% will cause a decrease in the exchange rate for the pound, which in turn will increase exports as our goods will be less expensive abroad and decrease imports. Both of which will boost domestic output and hopefully increase economic growth. The U.K at present economically is in a good position to weather the storms that a global downturn might bring when the global economy recovers the U.K will be better placed than most because of it's stable economic framework.

Social and cultural factors The market for mobile phones is considered to be saturated as the vast majority of the population seem to own a mobile phone. In recent years mobile phone masks have caused a stir in the tabloids, it has been argued by some scientists that they could be causing cancer, which have had parent calling for a ban on phone mask near schools. This however is not seen as a credible threat to the growth within the industry.

Technological factors 

Technological factors have always played a dominant role in shaping the telecommunications industry and this is no less true today. As the market for mobile phones has become increasingly saturated the industry has turned to new products and services to maintain its growth. A big investment that mobile companies have made and that have caused some to plunge into debt are the 3G licences. This new and larger bandwidth will enable a whole host of new service to include full Internet access, tele-conferencing, picture messaging and many more.

The industry is hoping these services will take off like text messaging making the 3G licences a worthwhile investment. In addition to these services that will be offered by the operators, customers will have from the services to purchase new 3G compatible handsets to fully be able to benefit which will in turn give mobile phone manufacturers a boost, thus benefiting Carphone Warehouse.Dividend yield is the amount received by the shareholder as a percentage of the share price. In 2002 the dividend yield was higher than the year before.


From the ratio analysis it is established that Carphone Warehouse would still be an ideal company to invest your shares in. This is due to the fact that the ratio shows that the company is able to maintain the financial stability of the company, the gearing of the company is at 50% and therefore it is not highly geared and at greater risk. The ROCE shows that it has improved from the previous year and the gross profit margin is also higher this year. Investor's may be interested in investing in Carphone warehouse as there has been an increase the dividend yield for the shareholders of the company.