Live UK mobile industry reaction to the news that Phones 4u has entered administration, stay here for updates from industry insiders throughout the day:
Andrew Harrison, deputy CEO, Dixons Carphone:
'They have been a great competitor for many years and we have nothing but respect for the job they have done in the market. We hope they can find a solution for their employees and of course do what we can to help.'
Mobile industry CEO:
‘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.
‘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.
‘The operators have shown that they are quite cunning. Although they can be high maintenance, when it comes to taking people out to benefit themselves, they take no prisoners.
‘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.
‘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.’
Smartphone manufacturer CEO:
‘It is shocking. Why did they not give Phones 4u more time to find alternative partners? Its contract with EE wasn’t up until September 2015.
‘I think the real reason behind this is that Vodafone and EE are both looking for higher ARPU. They want more affluent customers and Phones 4u is aimed at the youth market and so they have had much lower ARPU coming from P4u than from CPW or their own stores.
‘It leaves Dixons Carphone in a very interesting position. Dixons has no competition in consumer electronics since Comet died and now Carphone has just lost its main competitor. That makes them a very dangerous and dominant player in the UK mobile and Consumer electronics market. They now have a clear space to dominate the market.
‘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 P4u 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.’
‘Can Dixons Carphone take up the slack? Some of it but it will be at a premium. It certainly gives them the upper hand in negotiations with manufacturers.’
Unified comms CEO
Both Phones 4u and Carphone have spent years bashing the networks over the heads for more money and threatening to refuse to give them the connections they wanted if they didn't come up with the goods. But times have changed and with networks facing margin erosion they've had to look at their partners and ask what do they bring to the table? So they've decidied to compare the value of their partners and have decided to put Phones 4u in the relegated zone.
Smartphone manufacturer CEO:
I am not surprised at the news. There have been warning signs for sometime. The high street could not continue as it was. If you take the clothing industry as an example, if you had three stores next to each other selling the same suit and not having any point of differentiation, how many would survive? It is the same with mobile and now it’s starting to show.
Carphone faced the same problem but reacted in time, whereas Phones 4u didn’t seem to be able to see what everyone else could see. Phones 4u did well when Carphone was tied up with Best Buy but when Carphone finally came back with a vengeance, Phones 4u were still there, still doing the same old thing and caught like a rabbit in the headlights.
It’s the same problem with mobile manufacturers and operators as it is with retailers. There are too many of them and that lack of differentiation means that it is unsustainable.
Those manufacturers that traded heavily with Phones 4u will feel it as they were bound to be trading on 90 days or even 120 days. As the only major independent on the high street Carphone Warehouse will be able to squeeze manufacturers without a doubt.
With online continuing to grow retailers have got to raise their game. Phones 4u needed to offer a better instore experience.
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.
Much more to follow