Phones 4U’s £9m acquisition of Dial-A-Phone puts it on a closer footing to rival Carphone Warehouse. Surprisingly, Carphone has been instrumental in bringing down the valuation of Dial-A-Phone.
Phones 4u now will now add at least 10,000 extra contract connections a month, still some way short of Carphone, but with greater potential to scale both businesses and take on Carphone on the high street, on the internet and through promotions in newspapers.
Phones 4u intends to bolster Dial-A-Phone with better deals sourced through its long-term deals with Vodafone and Orange in particular, as well as it group buying of handsets.
Dial-A-Phone had been identified as a major threat to Carphone in 2005 when its share of the contract market had matched Phones 4U’s at 25% without opening a single shop, while Carphone had around 35%.
Carphone is known to have been rebuffed on several attempts to buy Dial-A-Phone with price valuations hovering around the £60 million mark. Carphone bought online market leader, Dial-A-Phone’s main competitors, OneStopPhoneShop and e2Save, in an attempt to bring down Dial-A-Phone’s market share and devalue the company. It used its market power to fatten up the two online retailers using its superior buying power.
Sources close to the matter said Carphone identified Dial-A-Phone as a major threat, and tried to squeeze the rival by buying smaller online and off-the-page outfits e2Save and OneStopPhoneShop. ‘The idea was to push Dial-A-Phone’s valuation down by hurting them through e2Save and OneStopPhoneShop,’ said a source.
Dial-A-Phone’s monthly connection levels sunk from around 40,000 a month to around 10,000 a month more recently, partly due to the assault from Carphone, but also a cooling in the market from operators towards contract deals that are over laid with cashback and discounted line rental offers.
Phones 4U and rival Carphone Warehouse are both known to have made approaches to acquire Dial-A-Phone for some time but were regularly put off by what they both considered unrealistic price valuations.