Phones4u To Enter Administration After EE And Vodafone Withdrawal

Phones4u is to enter administration after both EE and Vodafone ended their supply agreements with the mobile phone retailer, leaving it without a single network partner.

Vodafone ended its partnership earlier this month, with EE announcing its decision on Friday. Phones4u says both terminations were a shock, especially since both operators had been indicating that they viewed the company as a long-term partner.

Phones4u says it now has now choice but to enter administration, despite the firm generating £1 billion in revenues and making £100 during 2013.

Phones4u administration

“Today is a very sad day for our customers and our staff,” says CEO David Kassler. “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 UK.”

EE’s notice was only received on Friday, so the company has requested all of its 5,596 employees to turn up for work as normal this morning so they can be briefed on the situation. It is expected that all will continue to be paid until further notice, but none of the 550 Phones4u stores will open this morning.

Vodafone anger

O2 and Three had already severed ties with the retailer, but it is Vodafone’s decision that has angered parent company BC Partners, which purchased Phones4u in 2011 for around £600 million.

“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,” claims Stefano Quadrio Curzio, representative of BC Partners. “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. “

Vodafone has defended its actions, claiming it acted transparently during the negotiation period and that Phones4u said it had a number of alternative strategies if an agreement could not be reached.

Vodafone response

“We are saddened to read that Phones4U have gone into administration and the impact that will have on their employees,” the operator told TechWeekEurope. “However, we strongly reject any suggestion that we behaved inappropriately at any stage during our negotiations with Phones4U. The outcome was the result of a transparent negotiation over many months.

“Phones4U 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 Phones4U 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. So when we terminated our contract earlier this month, we made it clear that we would honour our existing contract, which runs until February 2015, to give them sufficient time to finalise one of those alternative strategies. It is now clear based on the events that have transpired that there were no viable alternative plans in place.”

Only last week, Phones4u was taking pre-orders for the iPhone 6, but any orders that have not yet been despatched will be cancelled. All operators will continue to provide network services to customers who signed a contract through Phones4u, including those with the firm’s LIFE Mobile Mobile Virtual Network Operator (MVNO).

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