5,400 employees fear for future as talks begin over Phones 4u

The future of Phones 4u and its 5,600 employees is hanging by a thread today as administrators begin talks on whether any stores can reopen.

5,400 employees fear for future as talks begin over Phones 4u

The corporate restructuring team from PricewaterhouseCoopers said it was hopeful that it will be able to pay all the outstanding wage arrears but that this was dependent on accessing funds to pay for the costs of the business.

PwC partner Rob Hunt said: “Our initial focus will be to quickly engage with parties who may be interested in acquiring all or part of the business, and to better understand the financial position and options for the company. The stores will remain closed while we have these conversations.

“We will also be talking to network operators and suppliers, and trying to access funds to pay for the costs of the business, including wages.”

The collapse of Phones 4u, which has 700 outlets including around 550 standalone stores, follows EE’s decision to join Vodafone in cutting ties with the retailer, which sells contracts on behalf of the network operators.

Entrepreneur John Caudwell, who set up the operation in the 1980s before selling it for £1.5bn (€1.9bn) in 2006, said he was “sickened and saddened” for the nearly 6,000 staff who work at the firm.

Phones 4u said the decision by EE not to renew its current contract — due to end next year — came as a “complete shock” and meant it would be left without a single network partner after Vodafone said earlier this month that it would not extend its agreement.

The company is owned by private equity firm BC Partners, which last year received a one-off dividend of £200m from Phones 4u.

Phone operators are increasingly targeting sales through their own stores while Phones 4u’s rival Dixons Carphone — created from Carphone Warehouse and the company behind PC World and Currys — has been successful in building relationships with the phone operators.

Phones 4u said that both EE and Vodafone had, until recently, indicated that they saw Phones 4u as a long-term strategic partner.

Stefano Quadrio Curzio, a representative of BC Partners, said: “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.”

Vodafone said it rejected any suggestion that it behaved inappropriately during its negotiations with Phones 4u.

It said: “Phones 4u was offered repeated opportunities to propose competitive distribution terms to enable us to conclude a new agreement, but was unable to do so on terms which were commercially viable for Vodafone in the current UK market conditions.

“We were told by the Phones 4u management team that they had little commercial flexibility due to their debt repayment obligations, but that they had a number of alternative strategies in place if we couldn’t reach an agreement with them.”

EE said its decision not to renew its contract in September 2015 was in part driven by uncertainty over the long-term viability of Phones 4u.

Phones 4u chief executive David Kassler said last night: “If the mobile network operators decline to supply us, we do not have a business. A good company making profits of over £100m, 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 the UK.”

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