Phones 4U is seeking administrator's protection after the mobile phone retailer failed to renew its contract with EE, a key mobile operator partner. Its current contract ends in September next year.
Phones 4U, which takes a cut of the profits from mobile operators to customers who want to compare prices from different operators, announced on Sunday that it will be appointing PricewaterhouseCoopers as its administrator and that the appointment will likely happen on Monday. Its 720 U.K. outlets, including the 550 stores, will be closed on Monday, but its nearly 6,000 employees are expected to show up for briefing by the management.
Phones 4U, which is owned by BC Partners, makes profits of more than £100 million every year but is saddled with £635 million in debts. Administrators will be expected to decide if Phones 4U can reopen on Monday.
"Today is a very sad day for our customers and our staff," said Phones 4U chief executive David Kassler. "If the mobile network operators decline to supply us, we do not have a business."
Two weeks ago, Vodafone withdrew its partnership with Phones 4U, following an April announcement that it is setting up 150 of its own retail stores in the coming 12 months and is shifting its focus on selling directly to its customers, effectively cutting out the middleman and taking a larger piece of the profit pie. Phones 4U's contract with Vodafone will end in February next year. O2 also stopped selling through Phones 4U earlier this year, while Three ended its relationship with the retailer before O2.
EE, which includes Orange and T-Mobile, has made about a tenth of its sales through Phones 4U and accounts for more than half of Phones 4U's sales. The operator follows in the footsteps of Vodafone, which provides 20 percent of Phones 4U's business. EE confirmed in a statement that has decided not to renew its contract with Phones 4U after 15 years of partnership.
"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," said an EE spokesperson.
EE, however, is likely to continue its relationship with Phones 4U rival Dixons Carphone, which also offers smartphones from Vodafone and O2, although Three pulled out its business from Carphone earlier this year.
BC Partners executive Stefano Quadrio Curzio lashed out at the mobile operators, saying EE's decision is "surprising" and that Vodafone "has acted in exactly the opposite way to what they had consistently indicated to the management of Phones 4U."
"Our overriding concern is for all the dedicated hardworking employees of Phones 4U at a time of uncertainty for the company," said Curzio. "Employees will continue to be paid until further notice."
Phones 4U founder John Caudwell, who sold the business in 2006, believes the move of the operators was made in cooperation with one another in an effort to reduce competition and jack up prices.
"It feels to me as though these networks are acting in unison," Caudwell said. "It'll be good for the networks ultimately but it can't be good for the customers, taking all that freedom of choice away."
However, Caudwell said that a "healthy business" is not "stripped and debt laden."
