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Boss blames ‘callous networks’

The founder of Phones 4u has blamed “extremely callous” mobile networks for the collapse of the company, which has put 5,600 jobs at risk.

John Caudwell said the decision of O2, Vodafone and EE not to renew their contracts within six months of each other appeared to be a “co-ordinated attempt to kill off” the retailer.

The entrepreneur, who set up the operation in the 1980s before selling it for £1.5 billion in 2006, said he could “guarantee” mobile handset prices would rise rapidly as a result, as administrators began talks on whether any Phones 4u stores can re-open.

Mr Caudwell told Sky News: “What I find appalling is the way this has been done. The way the networks seem to have worked in collusion.

“I’d love to be able to prove that point because if there was obvious proof of collusion, that’d be extremely worrying.”

The collapse of Phones 4u, which has 700 outlets including around 550 standalone stores, follows EE’s decision to join Vodafone in cutting ties with the retailer, which sells contracts on behalf of the network operators.

Staff were told to turn up for work yesterday in order to attend briefings with management but the stores remained closed.

Mr Caudwell, who said he was “sickened and saddened” for the nearly 6,000 staff who work at the Staffordshire-based firm, said he had never seen “such a ruthless, hard-hearted attempt to kill a company”.

He told Sky News: “This network decision is extremely callous, extremely ruthless, against a company that’s given it millions of connections over the last 20-odd years of partnership.

“You don’t treat a partner that you’ve been trading with all that time by just completely cutting off the supply instantly and then a few days later, the other supplier cuts it off. That just smells of collusion.

“You tell me where else that has ever happened in the last 50 years? I think this is a unique, one-off situation driven by a lack of margin…but driven massively by an attempt to reduce customer competitiveness in the high street.

“I guarantee, without doubt, prices of handsets will go up very quickly after this and who knows what the future is going to be for Carphone (Warehouse).”

Mr Caudwell said only the Government could now save Phones 4u, adding: “With no network supply, there’s no business.

“I’m not sure anybody, including the management team, saw it being this brutal.”

Vodafone said it rejected any suggestion that it behaved inappropriately during its negotiations with Phones 4u and indicated that the retailer’s debt repayment schedule hampered the discussions.

It 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 in the current UK market conditions.

“We were told by the Phones 4u management team that they had little commercial flexibility due to their debt repayment obligations, but that they had a number of alternative strategies in place if we couldn’t reach an agreement with them.”

Phones 4u said the decision by EE not to renew its current contract – due to end in September next year – came as 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.

At the Phones 4u flagship store on Oxford Street in central London, a staff member posted a notice to customers on the door – signed by “The heartbroken Phones 4u team” – which read: “Following the unexpected decision of EE and Vodafone to withdraw supply from Phones 4u, we regret that this store is currently closed.

The company is owned by private equity firm BC Partners, which last year received a one-off dividend of £200 million from the Phones 4u business.

Phone operators are increasingly targeting sales through their own stores while Phones 4u’s rival Dixons Carphone – created from Carphone Warehouse and the company behind PC World and Currys – has been successful in building relationships with the phone operators.

Phones 4u said that both EE and Vodafone had, until recently, indicated that they saw Phones 4u as a long-term strategic partner.

The corporate restructuring team from PwC said it was hopeful that it will be able to pay all the outstanding wage arrears but that this was dependent on accessing funds to pay for the costs of the business.

PwC partner Rob Hunt said: “Our initial focus will be to quickly engage with parties who may be interested in acquiring all or part of the business, and to better understand the financial position and options for the company. The stores will remain closed while we have these conversations.

“We will also be talking to network operators and suppliers, and trying to access funds to pay for the costs of the business, including wages.”

Stefano Quadrio Curzio, a representative of BC Partners, said: “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.”

EE said its decision not to renew its contract in September 2015 was in part driven by uncertainty over the long-term viability of Phones 4u.

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. Overall group turnover was more than £1 billion, with earnings of £105 million in 2013.

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

Phones 4u chief executive David Kassler said on Sunday: “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.”

Neil Saunders, managing director of retail consultancy Conlumino, said: “The example of Phones 4u is perhaps a salutary lesson to all retailers that they should be beware of being overly reliant on third-party providers that are not within their ultimate control.

“If retailing is about anything, it’s about adding value and creating strong USPs (unique selling points). That cannot be done, at least not sustainably, with a sole reliance on outside brands.

“As for Phones 4u itself, unless it can dramatically reconfigure its business, it looks likely that its place on the high street is well and truly disconnected.”

Vodafone’s management considered the acquisition of Phones 4u earlier this summer but the idea was dismissed on regulatory and commercial grounds.

The company said: “The decision to terminate our contract with them was made independently by the UK management team on purely commercial reasons following extensive negotiations.”

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