Sunday, 14 September 2014


From the Telegraph

EE, which is understood to account for around half of Phones 4U’s £1bn sales, made its decision after a strategic review. Vodafone, which said it would not renew its contract with the retailer earlier this month made up more than a quarter of sales. O2, which only accounted for around 10pc of sales, pulled out in February.

EE reached the decision amid concerns that Phones 4U was selling for only one of Britain’s main mobile operators. It was felt this reduced its appeal for customers who wanted to compare the prices of different operators.


BC Partners attacked the mobile operators.

Stefano Quadrio Curzio of the private equity firm 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.

What commercial alternative would you develop to having Vodafone? Vodafone, O2, Orange, and EE paid out for the 3G and 4G bandwidth and and each get to use a bit of it for a period of time. There's no alternative because the bandwidth is taken, and you can't create more of it.

David Kassler, chief executive of Phones 4U, 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.”

The operators are seeking to reduce the number of handsets and contracts they sell through third-party retailers, preferring to deal directly with customers and retain more of the profit margin.

Well, precisely. What were Phones4U adding by being a middleman? People often have so much information about phones that they often know what they want before they even walk into the store, especially on high end phones and contracts.

It's also a thing about relationships that these companies learnt from Apple. The Apple stores were not created so much as shops but as showrooms. They were so disappointed with how shops displayed their products and the poor advice that was given and lies customers were told to make a sale that they set up their own shops to show them off properly.

And that seems to be what my local Vodafone shop is like now. They've got the phones out, all working, beautifully displayed with helpful, well-trained, non-pushy staff. They don't care if you buy that day or walk away and buy online from them 2 days later. The bricks-and-mortar thing is more about trying out devices than buying them.


DBC Reed said...

EE seems to be pulling out of PhonesRus because they say the shop doesn't provide enough variety for comparison by customers: TS seems to be saying that customers are so prepped up they know which is best before they set foot inside.
This all relates to arguments customarily made in the debate over Resale Price Maintenance in which treating shops as places to make visual comparisons is called "showrooming".
I wonder whether some reference will be made to European anti-RPM law in this case.Manufacturers selling direct in shops with only one brand on view is RPM-ish.

The Stigler said...


I don't think it's really RPM. They don't mind what Phones4U sell phones for, it's more the price they're getting and the potential profits they could be making.

My guess is that someone crunched the numbers on retention on Vodafone and worked out that most customers now stay with them, so, if they stopped selling through Phones4U, their customers would just walk out of the shop and go to Vodafone to get a phone.

I'm amazed someone paid £1.5bn for that business. Even if it makes £100m/annum in profit now, there's a shift to just buying phones sim-free that means people will keep paying Vodafone for airtime and just grab a new phone from Tesco or Amazon. Even if Vodafone and EE hadn't ditched them that profit was going to dwindle.

DBC Reed said...

If you look up "How Apple sets its prices", there is pretty broad agreement that they are using some form of Resale Price Maintenance, particularly with e-books where you read "Apple found guilty of co-ordinating the fixing of e-book prices."
Something weird is going on at this end of the High Street and the whole "RPM is illegal per se" doctrine is under severe strain.

Mark Wadsworth said...

"The Apple stores were not created so much as shops but as showrooms. They were so disappointed with how shops displayed their products and the poor advice that was given and lies customers were told to make a sale that they set up their own shops to show them off properly."

Well, being now an Apple slave, I'd say that the advice etc you get from non-Apple outlets (Dixons, John Lewis etc) is far more impartial and honest than in Apple outlets.

The Stigler said...


I'm a fan of John Lewis for electricals, Dixons not so much.

JL have really good staff IMO, good training, honest advice, and any trouble (I had a Mac briefly and it had a fault and I returned it), it's no problem. Anyone I know wants a PC, printer, TV, PVR or whatever, I send them there. I know they'll get what they need.

Plus, if you buy Macs you generally get a better warranty from John Lewis than from Apple (my biggest problem with Macs is the US keyboard and that I really can't stand OSX - but they are very good hardware).