Phones 4u - Another one bites the dust?

Phones 4u - Another one bites the dust?

The land grab begins...
Phones 4u has a large number of stores and highly qualified staff with a proven track record of successfully selling value-added products. Clearly that is going to be very attractive to both established players and new businesses looking to move into the mobile space. How these stores are divided and how the staff are hired remains a different proposition altogether.

There is going to be a long period of maneuvering as the many interested parties vie for the spots they most desire. It may well be a case of buyers taking several stores they don’t want in order to get the few they really need – but whether that’s good for staff in the long run remains to be seen.
A smartphone manufacturer CEO who spoke to Mobile believes that the battle for shop space may turn rather sour: ‘Who will buy Phones 4u? BT has enough money, but does it want all those stores? Probably not. You could make a case for all of the operators to want some part of the portfolio. There is every possibility Vodafone will buy some leases, depending on the quality of the lease. But I think it will get nasty. If they
are clever they will all play the waiting game.’

Deals, deals, deals
Whenever one major decision is made regarding two big companies in any industry, increased scrutiny comes over the rest of the firms’ business relationships. The speculation surrounding EE’s partners has been particularly intense because the firms’ decision with Phones 4u comes as part of a wider review into its indirect channels of distribution. There were a number of rumours and opportunistic troublemaking from various interest parties in the wake of the Phones 4u announcement. Understandably there will be more speculation as EE’s review continues and we’ll have to keep watching developments closely to see if there are any more casualties.   

Interested parties
Several manufacturers had made sizable investments to show their products off at Phones 4u stores using the retailer’s staff expertise to really push a new product. This means that there could be some serious investments that will go to waste, likewise with the distributors where there must be a fear for the products lying taped off in their warehouses by the administrators. Hopefully the fluidity of the situation will move things on quickly but such events usually come at a cost.

One smartphone CEO said to Mobile that there were several companies in particular who would be hurt by the closure: ‘I would say Sony, Samsung and Nokia will be the manufacturers most affected by this as they do the most volumes. They cannot be happy about this, Samsung in particular must have spent a considerable amount on shop-in-shop branding. They have lots of concessions in Phones 4u stores so their investment has been wasted. There are a lot of manufacturers who have paid for store space and collaboration with Phones 4u who will lose out.’

This was echoed by another industry CEO who said that distributors would also be hit by Phones 4u’s  administration: ‘Is it going to affect distributors? Well, all operators are looking to make sure they tidy up their operations – not just EE and Vodafone, O2 as well. They are all looking for more structured relationships with distributors. It is not good news for Tech Data Mobile. They hold all of Phones 4u’s stock in their warehouse. They are now dependent on what the administrators do with that stock. That will all be cordoned off taking up valuable space until this is all sorted out.’

End of an era?
Does Phones 4u now go into the same category as HMV and Virgin Megastore or The Link and Comet? And if so what does that mean for Dixons-Carphone. In many ways the collapse of Phones 4u represents the end of the independent phone retailer era as the merger between Dixons and Carphone Warehouse has taken the other major player down a different path.

The real issue is whether this will be beneficial for the consumer, if prices rise as a result of more customers being locked into staying with their networks then it is surely negative. But we’ll have to see how things play out.

One mobile industry CEO told Mobile that the collapse of the large independents has been inevitable and that Carphone played their hand better when the crunch came: ‘Phones 4u failed to read the market. If Carphone hadn’t merged with Dixons they would have suffered the same fate in six or twelve months’ time. The difference is Carphone saw the writing on the wall, whereas Phones 4u did a concessions deal with Dixons. Carphone went in there and sold them the idea of a merger and now they’ve just lost a major competitor in Phones 4u.’

The blame game
Whenever major businesses are forced into administration, particularly ones with as healthy financials as Phones 4u, fingers start getting pointed about just who is responsible. Phones 4u kicked it off by laying the blame very much at the networks’ door, but since that opening gambit many have pointed to the regulator as being the one who pushed the networks into the position they were in.

This argument suggests that by continually clamping down on different revenue streams the operators have had no choice but to cut out the middleman and go direct. It’s a point that was made by one mobile industry CEO who spoke to Mobile: ‘When the regulators kept on squeezing the carriers, what did they expect them to do? Vodafone and EE have the right to say, this is what you asked for. We had to look at our structures and this is the outcome.’


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