Member Article

5,500 jobs at risk as Phones 4u forced into administration

Phones 4u has been forced into administration, putting over 5,500 jobs at risk after network operator EE declined to renew its contracts with the phone retailer.

The retailer, which employs 5,596 people, told Sky News its 550 standalone stores will be closed until the administrators decide on whether the business can reopen for trading.

The company said the decision by EE was 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.

Chief executive David Kassler said: “Today is a very sad day for our customers and our staff.

“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.”

An RNS note by the firm stated: “On Friday 12 September 2014 P4U was notified by EE Ltd. that it had also decided not to renew its network agreement with P4U which is due to terminate on 30 September 2015.

“The connections procured under the network agreements with Vodafone and EE currently represent in excess of 90% of the connections made by P4U.

“In light of the immediate impact that the recent decisions of Vodafone and EE are likely to have on the businesses and having taken appropriate advice the boards of the Companies have carefully considered the situation and have concluded that there is no reasonable prospect of avoiding insolvent liquidation and that they are no longer able to continue to trade.

“Accordingly the Companies have resolved to cease trading with immediate effect and place the Companies into administration.”

Staff have been asked to report to work as normal on Monday morning when they will be briefed by management.

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

The process of appointing PwC as an administrator is expected to take place on Monday.

Stefano Quadrio Curzio of BC Partners, Phones 4U’s private equity owner, said: “Our overriding concern is for all the dedicated hard-working employees of Phones 4u at a time of uncertainty for the company.

“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.”

A spokesperson for EE said: “In line with our strategy to focus on growth in our direct channels and to move to fewer, deeper relationships in the indirect channel, and driven by developments in the marketplace that have called into question the long term viability of the Phones 4u business, we can confirm that we have taken the decision not to extend our contract beyond September 2015.

“We will monitor developments and work to provide any necessary support for customers who joined EE through Phones 4u.”

The business was set up by entrepreneur John Caudwell in the 1980s

By the time he sold it for £1.5 billion in 2006 it was selling 26 phones a minute and employed 10,000 people. It generated sales of more than £2.25 billion.

Photo: © Copyright Basher Eyre and licensed for reuse under this Creative Commons Licence.

This was posted in Bdaily's Members' News section by Clare Burnett .