All 550 stores will be closed today as administrators assess the situation. The reason behind the company‘s downfall is network provider EE’s decision to not renew its contract, something which Vodafone also decided to do in the last couple of months.
Without these two major suppliers, the company cannot continue trading. As Phones 4U director said, “If mobile network operators decline to supply us, we do not have a business.”
He further said, “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.”
Owned by BC Partners, the mobile firm is based across the UK with 550 stores in total. Because of EE’s actions, Phones 4U has ultimately been forced into administration. Now, 5,596 members of staff are at risk of losing their jobs. Phones 4U said it had been a profitable business, with turnover of £1bn, underlying profits £105m in 2013
PwC have been appointed as administrators and will review all the options now available to the business. Any customers with mobile contracts will not be affected and any orders that are in dispatch status will still be delivered. Other orders will get full refunds. Customers can call Phones 4U customer service line on 0844 8712253.
Joint administrator, Rob Hunt, commented, “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.”
Obviously if the business is selling phones on a 12 month contract but Vodafone /EE say that they cannot supply a network guaranteed for the next 12 months, then the contracts are void and the directors could be accused of wrongful trading if they continue to sell phones, whilst knowing this. This explains the sudden closure.
With a lack of suppliers and an overcrowded market, mobile businesses have been facing serious problems. Earlier this year, Carphone Warehouse merged with Dixons to become Dixons Carphone in order to make the business stronger – Vodafone had renewed its contract with the new company.
Without Vodafone and EE supplying Phones 4U, the future looks bleak.
John Cauldwell, the former owner of the business, sold out in 2006 for £1.4bn. Could he look to make some sort of comeback under the Phones 4u banner? He will certainly get it a lot cheaper than £1.5bn. He said he was “shocked and saddened by the news”.
UPDATE: 23rd September – quite a few (good and bad) things have happened since the company went into administration last week. On Friday (19th), 628 redundancies were made at head office, however 400 were kept on by the administrators. It also emerged than Dixons Carphone would take on 800 Phones 4U staff working at concessions within PC World and Currys stores. In addition, Vodafone confirmed it would take over 140 stores, saving 887 jobs.
Yesterday (22nd), EE confirmed it is acquiring 58 Phones 4U stores, saving another 359 jobs. Unfortunately, PwC has stated the remaining 362 stores will be closing, resulting in an immediate loss of 1,697 jobs. 720 members of staff have been kept on to assist with proceedings but they too will likely face redundancy.
If you are an employee of the business, please listen to the video below as it will tell you your rights as an employee of an insolvent business. There is a link at the end of the video to the Government website which expands further on what you need to know. We are not involved in the administration and questions should be directed to PwC who are handling the administration.