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Monday, September 15, 2014

Phones 4u In Administration

Phones 4u has gone into administration, after EE decided not to renew its contract (which has until September 2015 to run) with Phones 4u.

Vodafone also recently terminated its contract with the firm, as had O2 some months ago.

Phones 4u employs 5,596 staff across 550 stores in the UK. The company has a turnover of £1BN and made a profit of over £100M.

Sadly, even though the business in itself is successful, without network operators it cannot exist.

Why have the network operators pulled the plug?

Money, they are facing reduced profits as result of caps on roaming charges etc; as such they are seeking to eliminate the middle man.

Two days ago John Caudwell, the founder of Phones 4U, saw the writing on the wall, and launched a scathing attack on Vodafone.

Mr Caudwell, who sold Phones 4u for £1.46BN, is quoted by the Telegraph:
I believe they really acted very, very ruthlessly. I get the feeling it came as a shock to the whole organisation of Phones 4u and potentially gave them no time to try and find a solution. 
I feel desperately worried for the future of Phones 4u. It’s in a really, really grim place. 
As far I can see it’s a well operated business that in a fair world has every right to exist. But we don’t live in a fair world, we live in a world where you make what you can for yourself and it’s a bit dog eat dog. I think that’s what’s happening here.

There’s a lot of ruthlessness being applied and if the public actually felt strongly enough they know what they could do, they could vote with their feet and move their business to other networks.

I don’t believe it can be rescued without one of the networks coming back to the table. Unless the government steps in we’ll be witnessing what was a phenomenal business destroyed by very ruthless behaviour. 

It seems a shame that a business I spent 20 years of my life growing looks like it could come to such a sticky end.

I fully respect Vodafone’s right to act whichever way they want to for their own best commercial interests, which is fully in line with free enterprise and trying to maximise their shareholder value. 

But I don’t think I could have ever behaved like that in Vodafone’s place. Business should have a bit of a heart. It isn’t just the bottom line at all costs.” 
Whilst Mr Caudwell may well be right in his sentiments about business having a "bit of a heart", I wonder if he applied those sentiments 100% when he sold Phones 4u?

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