Phones 4u enters administration… What it means

Phones 4u enters administration… What it means

As Phones 4u appoint administrators as a result of EE and Vodafone cutting ties with the retailer here’s what Mobile thinks the news means for the industry:

The finger of blame

Phones 4u made no bones about it in its statement, decisions by the major networks had forced them into a corner despite the business being healthy. The retailer said that not only were these hammer blows unexpected but that the networks had been deliberately misleading them for a lengthy period. Describing the events that had lead to Vodafone cutting its ties with the firm Stefano Quadrio Curzio, representative of BC Partners, pulled no punches in saying how he felt it had happened: ‘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.’ Curzio also attacked EE’s timing revealing that the network had cut its deal with the retailer short: ‘EE's decision on Friday is surprising in the context of a contract that has more than a year to run‘. Powerful and emphatic stuff, the start of more mud slinging? we’ll have to wait and see.   


Underlying potential

As Phones 4u mentioned numerous times in its statement the company enters administration in a position of financial strength. Specifically mentioning that business has ‘a turnover of over £1 billion, EBITDA of £105 million for 2013 and significant cash in the bank’. That means it still represents a great opportunity for any potential buyer with no financial burden to carry and a huge UK store presence. In fact entering administration at this stage whilst the business is still in a position of financial health could prove to be a major positive in the long run. The potential that remains within the Phones 4u business is undeniable, it is a large well known firm with a huge number of experienced staff who have a proven track record of selling value added services. However, much will depend on the approach that the administrators take, if they only seek to carve up the assets for the networks to fight over many of the best parts of the business will be lost.


The good news and the bad news

The feelings in the offices of Dixons Carphone to this news must be mixed at the moment. Clearly, the decision by EE to part with its only major competitor gives the firm a market leading position. But it also gives them the lonely status of being the only major high street retailer left. As the industry moves more and more towards direct channels Dixons Carphone must be well aware of the danger this poses for them. The demise of the independent sector also  raises another issue that was addressed by Phones 4u CEO David Kassler in the retailers statement: ‘The ultimate result will be less competition, less choice and higher prices for mobile customers in UK.’ Whether we look back on this as being true remains to be seen, but there is certainly a debate to be had about whether direct selling is good for the mobile industry.


Follow what the mobile industry's reaction to the news live here


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