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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 Parters, 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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Posted: 2014-09-14 23:46:33
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Never saw that coming.
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Posted: 2014-09-15 00:17:21
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Am in shock
I did read some networks kept pulling out but never imaged this so soon. I actually recently purchased from them and for a change their service was great!!
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Posted: 2014-09-15 00:26:57
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It did seem a bit inevitable. How can a company that specialises in mobile contracts keep running when they can't supply any contracts.
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Posted: 2014-09-15 00:37:43
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They are right when they say it's bad news for the customers. People like to have a choice. They said the landscape is shifting, with networks wanting to deal with the customer direct.
I suppose the networks would rather focus on keeping existing customers and reduce customers means of looking for a new / better contract offer.
Not good!
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Posted: 2014-09-15 00:43:28
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This just after Carphonewarehouse joined forces with Dixons Group. Now called DixonsCarphone(awful name) I was recently paid some money owed to me by Phones4U and it came up on my bank statement as DialAPhone/Phones4U credit. I never knew they were the same group aswell??
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Posted: 2014-09-15 01:42:56
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Carphonewarehouse has offered 1,500 job vacancies to Phones4U staff that need to be filled
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Posted: 2014-09-15 14:27:00
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I'm not shocked at all, or feel sympathy for them. They were sharks, and their sales practices where the worse, remind me of the mob. Mis-selling contracts, selling locked phones as "sim free", etc.
Awful business practices. What goes around comes around. Is called Karma.
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Posted: 2014-09-16 12:31:04
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http://www.mobilenewscwp.co.uk/2014/09/17/dixons-carphone-secures-p4u-jobs-as-ee-makes-move/
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Posted: 2014-09-17 20:01:00
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I wasn't their biggest fan, even though I once was successful in the initial stages of applying for a store manager vacancy with them.
But I don't want them to go under. If they do, Carphonewarehouse will be able to dominate the market as the only standalone store which offers all phones and networks in one place. Which means they will be able to put up prices and force their business models onto the consumer base at will.
Even worse, would be if CPW got into trouble too, because then the networks would do what they want and be able to rely easily on consumer ignorance. Literally people would walk into store and only get the single one operators opinion, of which they will all claim to be the best.
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Posted: 2014-09-17 23:46:24
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