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By | Kelly Fiveash 15th September 2014 12:13

Phones 4u website DIES as wounded mobe retailer struggles to stay above water

Founder blames 'ruthless network partners' for implosion

Phones 4u's website is currently telling customers that it is unable to trade due to "the unexpected decision of EE and Vodafone to withdraw supply" from the retailer.

It comes after the High Street firm, which has 550 stores throughout the UK and 5,596 employees on its books, confirmed late on Sunday that it had fallen into administration.

On Friday, EE told Phones 4u that it would not be renewing its contract with the company. That partnership is set to expire in September 2015.

Phones 4u said last night that it was "shocked" by that decision and claimed it could not continue to trade without mobile network partners, even though its contracts with Voda and EE will continue until next year.

O2 ended its relationship with the retailer in February.

Billionaire John Caudwell, who founded Phones 4u in 1987 before selling the business for $1.46bn 19 years later, hit out at Britain's big name mobile operators today.

He attacked the carriers in a series of tweets on Twitter.

Caudwell claimed that a "combination of short term private equity strategy combined with ruthless network 'partners' and government killed Phones 4u."

Vodafone told The Register today that it was "saddened" to hear that Phones 4u had gone into administration and acknowledged the likely effect the shuttering of the business, while it seeks a rescue plan, would have on its staff.

The company went on to rebut Phones 4u's claims. It said:

We strongly reject any suggestion that we behaved inappropriately at any stage during our negotiations with Phones4u. The outcome was the result of a transparent negotiation over many months. Phones4u 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 Phones4u 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. So when we terminated our contract earlier this month, we made it clear that we would honour our existing contract, which runs until February 2015, to give them sufficient time to finalise one of those alternative strategies.

It is now clear based on the events that have transpired that there were no viable alternative plans in place.

An EE spokesperson told us late yesterday that the mobile operator had decided not to renew the contract with Phones 4u in order to “focus on growth in our direct channels and to move to fewer, deeper relationships in the indirect channel.”

EE added that "the long term viability of the Phones 4u business" had been "called into question" following "developments in the marketplace".

What happens now?

El Reg put a number of questions to Phones 4u. We wanted to know why the company was seeking administration now, seeing as the network provider contracts with Voda and EE were yet to expire.

We also asked Phones 4u to explain what would happen to existing customer contracts and new orders, including iPhone 6 pre-orders.

Further, we sought a response from Phones 4u, after EE questioned "the long term viability of the Phones 4u business".

And finally, we quizzed Phones 4u on what employees had been told about the future of the business today.

"Phones 4u received unequivocal legal advice that the business had no other option than to seek the appointment of administrators from PwC," a company spokeswoman told us.

"As the news from EE was only received late on Friday, all staff are reporting to work as usual on Monday, 15 September and are being briefed by management this morning. This is happening both in all of [the] Phone 4u stores and at its head office.

"It is planned that staff will continue to be paid until further notice. The retail shops and website will not be trading today and the future of store trading will be decided by the administrator." ®

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