Major high street brand Phones 4U falls into administration

Phones 4U fell into administration on Sunday after its last remaining network provider EE joined Vodafone to cut connections with the store.

The high street brand is the latest British brand to fall victim to an uncertain economic climate.

On Monday all of the company’s 720 outlets nationwide remained shut, with 5,596 staff at risk to lose their jobs.

Executives from accountancy firm PricewaterhouseCoopers (PwC) were appointed as administrators to search for potential buyers for the company as a whole; however analysts expected very little interest in this which could lead to a gradual break-up of the portfolio of its stores.

The sudden closure of the Phones 4U chain founded by entrepreneur John Caudwell sparked a furious attack by its private equity owner against the mobile operator giants.

BC Partners blamed Vodafone and EE for putting at risk almost 6,000 jobs across the UK.

A representative of BC Partners Stefano Quadrio Curzio blamed Vodafone’s decision earlier this month to not renew its contract after 2015 as “exactly opposite” to what it had been indicating to Phones 4U over 6 months.  

He said: “Their behaviour appears to have been designed to inflict 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.”

Experts noted that the shift in the commission paid to third-party retailers reflected a move by operators to retain a greater profit margin by dealing directly with handset manufacturers and customers.

Vodafone attacked Phones 4U’s owners for failing to grant the company flexibility to make strategic decisions in terms of new investment.

In a statement the mobile operator said: “Phones 4U was offered repeated opportunities to propose competitive distribution terms to enable us to conclude a new agreement, but was unable to do so on terms which were commercially viable for Vodafone. We were told by the Phones 4U management team that they had little commercial flexibility due to their debt repayment obligations.”

BC Partners has made a profit of around £600m since it acquired the phone retailer three years ago.

Analysts believe main rival Dixon’s Carphone Warehouse will immediately benefit from a greater market share since it holds contracts with all the major operators.

Customer with existing contracts will see them through to their end. However, anyone who has subscribed to a new plan over the weekend will have to register again with the network provider.

This will add a further blow to the woes of Phones 4U particularly with the launch of Apple’s latest iPhone 6.

Naeem Arzu