Hi everyone. So some sad news today for British retail
in the mobile phone industry. Phones4U has called in
the administrators. Now at first you might think that this was because they weren't
making any money but actually
they had turnover of over a billion pounds a year and profits of £100m.
So why did they call in the administrators? Well,
it would seem that EE which is otherwise known as Orange and T-Mobile
has terminated its contract. It's refusing to
renew the contract that would allow Phones4U to continue selling handsets.
Vodafone cancelled its contract in February of this year.
Essentially Phones4U has had to go for administrative protection
to ensure that it can shut down the business as well as paying off any debts it might have
before effectively the business collapses because there's no product to sell.
Now Orange has released a statement and I think this is quite a telling statement
actually.
They say that the reason for not renewing the contract was driven by developments in
the marketplace that have
called into question the long-term viability of the Phones4U business
and that the decision was taken in line with our strategy to focus on growth in
our direct
channels. Now let me tell you a little something that's happening within the UK
phone market. Two of the largest electronics retail players
Dixons Stores Group which owns Currys, PC World and Carphone
Warehouse which has a huge number of retail
outlets across the UK are merging to form
Currys Carphone. That deal is expected to conclude in -
wait for it - October. PCWorld
has a concessions agreement with Phones4U for Phones4U concessions
within the Currys PCWorld stores. Can he see where this is going yet?
Essentially come that deal day for
Currys Carphone it would most likely cause contractual problems
for the DSG part of the business because it's already got a phone company
in all its stores - Phones4U. However, if Phones4U was to
hit the wall and go into administration likely that would put them immediately
in breach of contract and Dixons Stores Group
can sweep away Phones4U from the stores. Conspiracy theory maybe
but if you look at the way the marketplace has been reshaped over this
last year and
is going to continue to be reshaped, it's pretty easy to see that the mobile
networks would much rather deal with one player than
three. With three players they have to negotiate
three different contracts, three times the cost generally across the business
of administering those lines.
However if you only have to deal with one company and that one company
you can essentially dictate terms to because you can say well if there's only
one company there's no competition and
if you don't accept the pricing we give you, we will cut you out as well and
we'll just sell direct. It's a dangerous time for retailers working for the mobile
networks in my opinion because now
we only have one major piece of competition
for the direct channel the mobile networks are offering. That will be
the Currys Carphone Warehouse tie-up. With Phones4U gone
we've now lost three major players and replaced them with just one.
In my opinion this is not what the competition watchdog meant
when they gave the green light to the Currys Carphone tie-up.
Then they felt that there would be two major players in the market.
Now there is only one major player and the mobile networks.
This has not created competition and it's starting to look like the mobile
networks have deliberately
screwed over Phones4U in order to give the
Currys Carphone partnership the best possible chance of launching.
It's going to be very interesting to see what happens come October when these two
companies merge
and ultimately when Phones4U disappears from the marketplace. This is a dark day
for consumers
and we should mark this day really as the day when competition in the mobile
market within the UK
simply died. Thanks for watching. Do please subscribe onYouTube and Twitch
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