Phones 4U entered administration last night as its final network partner EE confirmed it will now be renewing its airtime agreement with the 18-year-old firm.
The news comes just a fortnight after Vodafone announced it will sever ties with the retailer in February.
News on the future of its 700 plus stores and five thousand plus staff had not been confirmed at time of writing, although they are not expected to trade today. (September 15)
All current contracts will continue to run as per normal for now. The Phones 4u website was however taken offline at the time of writing.
Phones 4U chief executive David Kassler said: “Today is a very sad day for our customers and our staff.
“If the mobile network operators decline to supply us, we do not have a business.
“A good company making profits of over £100m, employing thousands of decent people has been forced into administration.
“The great service we have provided should have guaranteed a strong future, but unfortunately our network partners have decided otherwise.
“The ultimate result will be less competition, less choice and higher prices for mobile customers in UK.”
“Maximum damage”
News comes just three years after Phones 4U was sold to BC Partners for £700m. Phones 4U had a turnover in excess of £900m at the time.
BC Partners spokesperson Stefano Quadrio Curzio added: “Our overriding concern is for all the dedicated hard-working employees of Phones 4u at a time of uncertainty for the company.
“Vodafone has acted in exactly the opposite way to what they had consistently indicated to the management of Phones 4u over more than six months. Their behaviour appears to have been designed to inflict the maximum damage to their partner of 15 years, giving Phones 4u no time to develop commercial alternatives.
“EE’s decision on Friday is surprising in the context of a contract that has more than a year to run and leaves the board with no alternative but to seek the administrator’s protection in the interests of all its stakeholders.”
Last weeks decision by Vodafone, which has worked with Phones 4u since 1996, will take affect from February next year and follows exits from O2 in January this year and Three in April 2012.
Insulting
As an added insult, Vodafone, which made the decision following an independent partner review, has since committed its long-term future to rival Dixons Carphone. It meant that as of March 2015, Phones 4u – the UK’s second-biggest retailer behind Carphone Warehouse with 700 stores – will only offer services running off the EE network (EE, Orange, T-Mobile, Virgin and Life Mobile).
EE, who has been conducting an independent retailer review announced late last night it too has decided to part company with Phones 4U leaving the retailer with no direct network agreements.
The deal will terminate in September at the latest once the contract expires and will not be renewed.
An EE spokesperson said: “In line with our strategy to focus on growth in our direct channels and to move to fewer, deeper relationships in the indirect channel, and driven by developments in the marketplace that have called into question the long term viability of the Phones 4u business, we can confirm that we have taken the decision not to extend our contract beyond September 2015.
“We will monitor developments and work to provide any necessary support for customers who joined EE through Phones 4u.”
No way out
Industry analysts said following Vodafone’s decision they feared this could be the beginning of the end for the 18-year-old firm.
Ovum analyst Steven Hartley said: “I really can’t see a way out for them. The only thing I can see, unfortunately, is Phones 4u disappearing.” Verdict Retail analyst Matthew Rubin described the announcement as a “kick in the teeth” for all involved at Phone 4u.
“It puts them in a really weak position. I wouldn’t go as far as to say it’s terminal but it’s got to be a bad sign of things to come.”
Canalys senior analyst Tim Coulling added: “I don’t see them lasting for very long if they lose other operator partners. It makes sense for the operators to trim down when you’ve got the beginnings of a dominant player in the market place in Dixons Carphone.”
Phones 4u chief executive David Kassler said Vodafone’s decision was disappointing with the mobile operator making it “apparent” an extension of the existing deal was unlikely.
Reconciliations?
Kassler said Phones 4u was in discussions with existing partners, other networks and third-party MVNOs to seek to reallocate the Vodafone volume.
Mobile News contacted O2, which insisted there were no plans for a return to Phones 4u, as did sources at Three. O2 accounted for less than 10 per cent of contract sales at Phones 4u at the time of its departure whilst Three business was said to have been minimal.
“Although we are disappointed, Phones 4u continues to trade well in the market. We have high levels of market share, especially in the youth segment,” said Kassler.
“Transactions and search traffic through our new mobile commerce site are growing rapidly as customers increasingly look to begin their purchase journey online, and they are continuing to choose to shop with Phones 4u.”