Phones 4u to go into administration

Monday 15 September 2014

Phones 4u is to go into administration - placing more than 5,500 jobs at risk - after network operator EE joined Vodafone in cutting ties with the retailer.

The company said its stores will be closed today pending a decision by the administrators on whether the business can be reopened for trading.

Phones 4u said the decision by EE not to renew its current contract, which is due to end in September next year, was a "complete shock" and meant it would be left without a single network partner after Vodafone said earlier this month that it would not extend its agreement.

The company, which is owned by private equity firm BC Partners, has 550 standalone stores, employing 5,596 people.

Phones 4u chief executive David Kassler said last night: " Today is a very sad day for our customers and our staff. If the mobile network operators decline to supply us, we do not have a business. A good company making profits of over £100 million, 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."

Staff have been asked to report to work as normal this morning as they will be briefed by management. The business was set up by entrepreneur John Caudwell in the mid-1980s. By the time he sold it for £1.5 billion in 2006 it was selling 26 phones a minute and employed 10,000 people. It generated sales of more than £2.25 billion.

Phones 4u said it remained a profitable business, with turnover of over £1 billion, underlying earnings of £105 million 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."

The end of Vodafone's relationship with Phones 4u in February will see it enhance its distribution partnership with Dixons Carphone - the business recently created from the merger of Carphone Warehouse with the owner of PC World and Currys.

The Vodafone tie-up with Phones 4u represented some £212 million of sales and about £18.5 million of earnings in the year to July 31.

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."

Phones 4u said all mobile contracts bought through Phones 4u will remain unaffected and the networks will continue to provide mobile services to these customers.

The process of appointing PwC as an administrator is expected to take place today.