With Phones 4u entering administration, Paul Withers looks at how the demise of the retailer will affect the industry and its consumers
The mobile phone industry has been left counting the cost of Phones 4u’s collapse after it entered administration last week.
The firm ceased trading on September 17, resulting in the closure of 720 stores and placing the jobs of 5,595 staff in jeopardy.
Phones 4u went into administration after EE said it would not be renewing its airtime agreement with the firm. Half of Phones 4u’s estimated customer base of 5.4 million were EE subscribers.
Phones 4u had faced a battle for survival after Vodafone terminated its partnership just two weeks earlier. Phones 4u had processed 430,000 Vodafone contracts and 125,000 prepay connections.
O2 ended its partnership with Phones 4u in January, with Three exiting in April 2012.
Phones 4u reportedly had stock of around 300,000 mobile handsets across its store estate, with 800,000 customers on its insurance arm and 90,000 users on its EE-run LIFE Mobile MVNO.
Mobile News understands it costs operators around £150 to process a new connection through independent retail, meaning they had paid Phones 4u around £800 million for the estimated 5.4 million connections on its base. That will obviously mean huge savings now for operators at a time when revenues are being squeezed by regulation.
Tech Data Mobile and Kondor are most likely to feel the pinch in the distribution sector.
Phones 4u had appointed Tech Data Mobile in February 2013 to operate all warehousing, forward and reverse logistics activities for its stores over the course of three years. According to sources close to the distributor, three to four million handsets for Phones 4u were passing through Tech Data Mobile’s warehouse annually, valued at around £500 million.
Kondor is also believed to be managing Phones 4u’s online fulfilment on accessories, so the distributor is likely to feel a heavy impact from Phones 4u’s collapse, too.
Strax admitted Phones 4u going into administration isn’t ideal, but that it would not be a “game stopper” for it. Brightstar 20:20 said it only supplies a small amount of accessories to Phones 4u, with quarterly revenues marginally affected.
iPhone 6 disaster
Consumers are also feeling the full force of Phones 4u’s demise. Although contracts taken out prior to the retailer entering administration remain valid and the networks will continue to provide services to these customers, any orders made but not yet dispatched will be cancelled and payments refunded.
Phones 4u’s collapse has come at the worst possible time, especially as it happened less than a week before the iPhone 6 and iPhone 6 Plus went on sale on September 19.
On September 12 – the day the iPhone 6 and iPhone 6 Plus were made available for pre-order – Phones 4u said the number of people who had registered for more information about the new smartphones had more than doubled since 2013.
Two days later, consumers learned of Phones 4u going into administration, followed by the news that any orders that had not been dispatched, including the iPhone 6, would be cancelled, with customers receiving a refund.
Considering the device was not due to reach customers until September 19 at the earliest, thousands of people are going to be disappointed.
Worse still, on September 15, Apple said many iPhone 6 and iPhone 6 Plus pre-orders= may not reach customers until October as demand was exceeding supply, leaving disappointed customers that had already ordered the devices a long way back in the queue.
It seems unlikely we will ever see the Phones 4u brand again. Anyone buying the company will start with no products or services to sell, so will likely rebrand, while it would be a huge surprise if one of the networks made a U-turn and went back into the retailer.
It may well be time to bring down the curtain on the 18-year-old firm that grew to become one of the UK’s biggest mobile phone retailers.