Phones 4u enters administration, stores close

(Reuters) - British mobile phone retailer Phones 4u [PHONE.UL] entered administration, a form of creditor protection, on Monday after the country's biggest mobile operator EE joined Vodafone VOD.L in not renewing its network agreement.

The detail of a printed message is seen on a branch of Phones 4u in west London, September 15, 2014. REUTERS/Toby Melville

The contract with EE, which comprises T-Mobile DTEGn.DE and Orange ORAN.PA, 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.

Shares in Dixons Carphone DC.L, Phones 4u's main rival, rose as much as 4.3 percent on Monday.

“The collapse of the Phones 4u chain seems good news for their principal competitor ... but not if it means that the mobile phone networks are about to start taking more control of the distribution chain,” said independent retail analyst Nick Bubb.

Three executives from PwC [PWC.UL] were appointed as administrators to the retailer, majority-owned by private equity firm BC Partners [BCPRT.UL].

Phones 4u’s 550 standalone stores did not open on Monday and will remain closed, pending a decision by the administrators on whether the business can be reopened for trading.

“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,” said Rob Hunt, joint administrator and PwC partner.

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He said the administrators will also be talking to network operators and suppliers, and trying to access funds to pay for the costs of the business, including wages arrears.

Phones 4u said all mobile contracts purchased through it would 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 business.”

“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 in Britain.

EE said in June it was reviewing sales through third-party retailers.

BC Partners representative Stefano Quadrio Curzio said EE’s decision was surprising as the contract had more than a year to run.

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) notes.

The senior secureds plunged around 30 points, from a 38 bid to just 8 on Monday morning, though they clawed back some ground to a bid of about 19 in the afternoon. The PIK notes are essentially worthless.

Reporting by James Davey in London and Aurindom Mukherjeein Bangalore; additional reporting by Robert Smith; Editing by Louise Heavens and Michael Urquhart