Phones 4U has been a High Street fixture since the 1980s and the start of the mobile era Photo: PA
Phones 4U collapsed into administration on Sunday night after its last
remaining mobile operator partner, EE, cut ties with the retailer, The
Telegraph can reveal.
Phones 4U has 720 outlets, including 550 standalone stores, and employs 5,596
people. Staff will be briefed by management in stores and at head office on
Monday morning. BC Partners, Phones 4U's private equity owner, said it is "intended
that employees will continue to be paid until further notice".
Mobile industry sources said EE informed Phones 4U of its decision last week.
After being contacted by The Telegraph on Sunday BC Partners said it would
seek to appoint PwC as adminstrators on Monday.
Phones 4U stores will be closed pending a decision by the administrators on
whether they can be reopened for trading. Mobile contracts signed through
the retailer will be unaffected.
BC Partners is also expected to inform bondholders on Monday. The value of the
retailer’s debt has plunged to 13p in the pound since the private equity
firm raised £205m on the Irish Stock Exchange last year.
BC Partners has made a profit of more than 30pc since it bought Phones 4U
three-and-a-half years ago for around £600m.
EE, which is understood to account for around half of Phones 4U’s £1bn sales,
made its decision after a strategic review. Vodafone, which said it would
not renew its contract with the retailer earlier this month made up more
than a quarter of sales. O2, which only accounted for around 10pc of sales,
pulled out in February.
EE reached the decision amid concerns that Phones 4U was selling for only one
of Britain’s main mobile operators. It was felt this reduced its appeal for
customers who wanted to compare the prices of different operators.
BC Partners attacked the mobile operators.
Stefano Quadrio Curzio of the private equity firm said: “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.”
David Kassler, chief executive of Phones 4U, 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
£100 million, 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.”
The operators are seeking to reduce the number of handsets and contracts they
sell through third-party retailers, preferring to deal directly with
customers and retain more of the profit margin.
EE, Britain’s biggest mobile operator, did about a 10th of its business
through Phones 4U on a deal that would have run until September next year.
It is likely to ramp up sales through other channels, particularly its own
570 stores, in an effort to replace those revenues.
EE was in talks with Phones 4U about a potential contract renewal as recently
as July, but the commercial terms put forward by the retailer were rejected
by the operator as out of line with industry norms, sources said. Phones 4U
walked away from the negotiating table and did not return.
The collapse of Phones 4U will be a boost to its main rival Dixons Carphone,
which has deals with all three mobile operators.
It is understood that the retailer was considering a complaint to competition
watchdogs at the weekend, alleging co-operation between mobile operators
aimed at reducing competition on the high street to drive up prices.
The claim was supported by John Caudwell, the billionaire who founded Phones
4U in 1987 and sold it in 2006. He said: “It feels to me as though these
networks are acting in unison. It’ll be good for the networks ultimately but
it can’t be good for the customers, taking all that freedom of choice away.”
However, he also said he “did not agree with a healthy business being stripped
and debt laden”.
Operator sources dismissed talk of a competition investigation as “an
attempted distraction”.
An O2 spokesman said the operator was unaware of a competition complaint being
prepared: “We make all our decisions independently of others.”
EE and Vodafone declined to comment.
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