Business

Phones 4U shops closing down across UK

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Media captionStaff from Phones 4U in Stockport posted up a ''heartbroken'' sign in their window

Retailer Phones 4U has gone into administration putting 5,596 jobs at more than 700 outlets at risk.

Accountancy firm PwC has been appointed to see if any of the 560 stores and 160 concessions can be re-opened or sold.

The retailer, owned by private equity firm BC Partners, blamed the decision to shut its shops on mobile network EE's decision not to renew its contract

This followed a similar move from Vodafone earlier in September.

"If mobile network operators decline to supply us, we do not have a business," said Phones 4U boss David Kassler.

The company said established mobile contracts taken out through it would not be affected, although phones ordered and not despatched - for example anyone ordering the new iPhone 6 over the weekend - would be. A customer service line will be open from Monday at 09:00.

In a statement, PwC 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.

"These conversations will determine whether we can re-open stores and trade, and also if and when we can pay the arrears of wages to employees. Our hope is that we will be able to pay all the outstanding wages arrears."


What next for customers?

Will this affect mobile phone contracts bought through Phones 4U?

All existing mobile phone contracts will be honoured, the company says. Networks will continue to provide mobile services to these customers, so customers will be able to continue using and paying for their phone as normal.

The company says that any existing discount deals will still be honoured. Some customers receive a £5 discount each month.

Clearly, customers will still have a decision to make about where to take their custom when their contract expires.

What about phone insurance policies?

Again, these policies will be honoured. Anyone who needs to make a claim if, for example, their phone has been stolen will still be able to do so, with staff still available to take these calls on 0844 8710535.

What happens if a phone has been ordered from Phones 4U?

The company says that any phones that have been ordered and sent out can be used as normal by customers.

However, orders of phones yet to be dispatched will be cancelled and refunds automatically paid to customers.

Phones 4U customer services remain operational and available on 0844 8712253, the company adds. Customers whose phones are being repaired can call 0844 8712269. Their repairs will be completed with the phone being sent back to their home address rather than a store.


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Media captionRory Cellan-Jones reports: ''The competition to sell mobile phones is getting ever more intense"

A spokesperson for EE said the decision not to renew its contract with Phones 4U was "driven by developments in the marketplace that have called into question the long term viability of the Phones 4U business".

The spokesperson added that the decision was also "in line with our strategy to focus on growth in our direct channels".

EE, Vodafone and 02 all have around 500 stores across the country, broadly the same size network of stores that Phones 4U has, and sell directly to customers through these.

BC Partners said EE's contract was due to expire next September, a full year from now.

Image caption A sign posted in a Phones 4U shop. The same message appears on the website

It warned "the ultimate result will be less competition, less choice and higher prices for mobile customers in the UK"

Analyst Rahul Sharma, from Neev Capital, told the BBC the network operators own businesses were under pressure and the companies were trying to shore up their profits. He also pointed out the EU has put pressure on their charges, most recently stamping down on roaming costs.

Professor Andre Spicer, from the Cass Business School, said customers had less need of high street phone shops in any case: "Currently the networks are asking how they can take over more of the supply chain so they can reap a greater percentage of the profit created.

"Consumers are no longer scared of smart phones. This means they are less in need of a sales person to walk them through the purchase. Instead, they are likely to be happier buying devices online. This leaves retailers with less space for growth."

'Sad day'

Mr Kassler, chief executive of Phones 4U, said it was a "very sad day" for both customers and staff.

"A good company making profits of over £100m, employing thousands of decent people has been forced into administration," he added.

The firm said EE and Vodafone's decisions not to renew their contracts had come as "a complete shock".

Phones 4U said it had only received EE's decision late on Friday.

Stefano Quadrio Curzio, from 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.

"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."

But in a statement, Vodafone said it had been in negotiations with the high street chain for months: "We strongly reject any suggestion that we behaved inappropriately at any stage during our negotiations with Phones 4U.

"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."


Business editor Kamal Ahmed writes:

The collapse of Phones 4U is about much more than the demise of a High Street chain that sells mobile phones and the possible sad loss of thousands of jobs.

According to the profitable retailer, it is actually about a reduction in competition.

Mobile contracts for consumers will now - even more - be dominated by the mobile operators themselves direct selling to customers.

Sources at Phones 4U say that Dixons Carphone is now the only major place when customers can get comparisons between operators. And that, as far as Phones 4U is concerned, is not a good thing.


Dixons Carphone said in a statement: ""We would like to offer our support to the colleagues and customers of Phones 4U. With regards to our Phones 4U shop-in-shop colleagues we hope to help them secure new jobs with us and will be opening up discussions with the administrators to agree what we can do."

Phones 4U was set up by the entrepreneur John Caudwell in the middle of the 1980s and sold for £1.5bn some 20 years later.

Phones 4U said it had been a profitable business, with turnover of £1bn, underlying profits £105m in 2013 and plenty of cash in the bank, but that without the contracts from the phone networks it no longer had a business.

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