Phones 4u administration: networks accused of ‘ruthlessness’

Phones 4u was placed into administration after the mobile phone operators, understood to account for a total three-quarters of the business’s sales, severed ties with the company.

A good company making profits of over £100m, employing thousands of decent people, has been forced into administration. David Kassler, Phones 4u chief executive

Vodafone, which accounted for around 25 per cent of Phones 4u sales, said it would not renew its contract earlier this month. EE is understood to have informed Phones 4u of its decision last week.

Phones 4u, owned by private equity investor BC Partners, has 720 outlets including 550 standalone stores. Phones 4u stores were closed on Monday pending a decision by administrators on whether or not the stores can be reopened for trading.

‘Higher prices’

The phone chain’s chief executive criticised the action of the network operators, saying it would lead to less choice and higher process for mobile phone users in the UK.

“Today is a very sad day for our customers and our staff,” David Kassler said on Sunday night. “If the mobile network operators decline to supply us, we do not have a business.

“A good company making profits of over £100m, 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 the UK.”

Before the administration was announced, Phones4u founder John Caudwell, who sold the business in 2006, accused Vodafone of acting “very, very ruthlessly”.

He told the Telegraph at the weekend: “It seems a shame that a business I spent 20 years of my life growing looks like it could come to such a sticky end.”

Mr Caudwell later tweeted: “I am sickened and saddened for nearly 6,000 wonderful employees who made Phones 4u into a great business.”

He included the hashtags #ruthlessvodafone and #ruthlessEE (see below).

I am sickened and saddened for nearly 6000 wonderful employees who made @Phones4u into a great business. #ruthlessvodafone #ruthlessEE

— johncaudwell (@johndcaudwell) September 15, 2014

And Stefano Quadrio Curzio, a representative of BC Partners, 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.”

‘Heartbroken’

The decision by the two network operators leaves Phones 4u without a single network partners after O2 also broke ties with the company at the start of the year.

Phones 4u said it remained a profitable business, with turnover of over £1bn, underlying earnings of £105m in 2013 and significant cash in the bank.

It said: “The unexpected decisions by both Vodafone and EE have come as a complete shock to the business.

“The company is in a healthy state and both EE and Vodafone had, until very recently, consistently indicated that they saw Phones 4u as a long-term strategic partner.”

Phones 4u’s website was taken off line on Monday, replaced by statement including customer service contacts, and signed by the “heartbroken Phones 4u team”.

In a statement, EE said: “In line with our strategy to focus on growth in our direct channels and to move to fewer, deeper relationships in the indirect channel, and driven by developments in the marketplace that have called into question the long-term viability of the Phones 4u business, we can confirm that we have taken the decision not to extend our contract beyond September 2015.

“We will monitor developments and work to provide any necessary support for customers who joined EE through Phones 4u.”