Phones 4u administration puts 5,596 jobs at risk
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[September 15, 2014]
(Reuters) - British mobile
phone retailer Phones 4u [PHONE.UL] is seeking
administrators, putting 5,596 jobs in jeopardy, after
the country's biggest mobile operator EE joined Vodafone
in not renewing its network agreement.
The contract with EE, which comprises T-Mobile and Orange, was
crucial to Phones 4u's future after it lost Vodafone's contract
earlier this month, leaving the company with EE as its only partner.
The EE contract ends in September next year.
"If the mobile network operators decline to supply us, we do not
have a business," said Phones 4u Chief Executive David Kassler.
Phones 4u, majority-owned by private equity firm BC Partners [BCPRT.UL],
said it was seeking the appointment of administrators from PwC [PWC.UL]
and its 550 UK stores would not open on Monday, pending a decision
by the administrators on whether the business can be reopened for
The firm said all mobile contracts bought through Phones 4u will
remain unaffected and the networks will continue to provide mobile
services to these customers.
Phones 4u, which in 2013 made an underlying profit of 105 million
pounds ($170.56 million) on turnover of over 1 billion pounds, said
the withdrawals by Vodafone and EE had come as "a complete shock to
"The great service we have provided should have guaranteed a strong
future, but unfortunately our network partners have decided
otherwise," said Kassler, adding that the ultimate result will be
less competition, less choice and higher prices for mobile customers
EE said in June it was reviewing sales through third-party
BC Partners representative Stefano Quadrio Curzio said EE's decision
was surprising as the contract had more than a year to run.
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Shares in Dixons Carphone, Phones 4u's main rival, rose as much as
4.3 percent on Monday.
The company's problems appear to help its main rival, said
independent retail analyst Nick Bubb, "but not if it means that the
mobile phone networks are about to start taking more control of the
Seb James, CEO of Dixons Carphone, said last week the firm was happy
with its network relationships.
Phones 4u was set up by entrepreneur John Caudwell in the 1980s. He
sold the business to Providence Equity Partners and Doughty Hanson
for 1.46 billion pounds in 2006.
Providence Equity Partners and Doughty Hanson sold off parts of the
business before selling the rump to BC Partners for about 700
million pounds in 2011.
Phones 4u's debt includes 430 million pounds of 9.5 percent senior
secured notes due 2018 as well as subordinated payment-in-kind (PIK)
The firm said on Sept. 1 it had 93 million pounds of cash as of the
end of July.
(1 US dollar = 0.6156 British pound)
(Reporting by Aurindom Mukherjee in Bangalore and James Davey in
London,; Editing by Eric Walsh and Louise Heavens)
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