Phones 4U Enters Administration as EE Pulls Contract

Phones 4U

Phones 4U is entering administration after EE pulls its contract with the company. The owner of Orange and T-Mobile is not the only telecoms owner to leave either. The decision came after O2 and Vodaphone both decided not to renew contracts.

The decision means that 500 stores will not open on Monday morning. Almost 6,000 people will lose their jobs, but are reportedly going to be paid for the time-being. The decision is not currently due to the company losing profit. It is because it will lose profit in the future, and cannot continue to do business as a third-party phone retailer. Chief Executive of the company, David Kasslet, explained that there is no business without the network operators.

Those watching the news may have been ready for Phones 4U closing down. EE had previously stated that it was considering the benefit of using third-party retailers. The company prefers to make the deals with its customers directly. It seems like other companies believe the same thing, but the move has certainly come to a shock for the third-party retailer.

EE also made it clear that there was no point in supplying the retailer with contracts if other operators were not doing. The whole point was for consumers to walk in and find the best network to join quickly and easily. Without Vodaphone and O2, it would not be able to do that. EE already took roughly 50 percent of the business and had decided to pull its contract, causing Phones 4U to enter into administration.

Those who currently have contracts through the business will not be affected. People who currently have phones being repaired through the business will receive their fixed or their new handsets. The handsets will be sent directly to customers’ homes instead of to a store, as previously explained. Customer service will also be available for the time-being. However, the company has not given a date for when this will no longer be the case.

People who have taken out insurance through the company will also still be able to make claims until the insurance runs out. The main decision for customers is where to go once their cell phone contract expires.

Kassler expected the business to continue for many years. Just last year, the turnover was more than £1 billion ($1.62 billion), and the underlying profit was £105 million ($170 million). Had the network operators continue to supply the business, there would have been no question of keeping the business open.

Many now wonder about the lifetime of Phone 4U’s main competitor Carphone Warehouse. At the moment, this company still has the contracts in place but that could change at any moment. It really seems like the network carriers want customers to deal with them directly, and want to eliminate as much competition as possible.

Vodaphone will not shoulder any of the blame for the company’s collapse. It puts all the blame on the owners of the retailer. According to the network carrier, the company’s private equity owners were loading large amounts of debt onto it.

However, the pulling of the EE and other contracts is certainly partially to blame for Phones 4U entering administration. Kessler makes a valid point that without the operators, the retailer cannot continue.

By Alexandria Ingham

Sources:

Reuters

BBC

The Telegraph

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