Monday, 15 September 2014

Phones 4U

It seems that our fragile recovery can still claim victims.

The good news:
Phones 4U is the UK’s second largest independent mobile phone retailer behind Carphone Warehouse, with some 500 high street shops in 2012. In 2010 sales increased by 20.4% to just under £750m, bolstered by further expansion of the in-store units at Dixons.

The bad news:
Vodafone hangs up on Phones 4U and ups distribution with Dixons Carphone.

There was nothing wrong with the business, however, the supplier has pulled the plug and the business has nothing to provide!

Carphone's decision this year to merge with electricals retailer Dixons is thought to have been prompted by growing unrest among its biggest customers – the mobile networks whose connections it sells. Three pulled its business from Carphone earlier this year. Hammered by the financial crisis and regulated price cuts to the cost of phone calls, with Europe tackling bill shock by imposing strict limits on how much customers can be charged for using their phones on holiday, networks have been looking for savings. An obvious place to cut was in the use of third-party resellers, who have enjoyed healthy margins in the UK compared with elsewhere in Europe. Vodafone has invested heavily in expanding its own-brand stores, making it less reliant on Phones 4u and Carphone.

Phones 4U said it remained profitable, with turnover of more than £1bn, underlying earnings of £105m in 2013 and significant cash in the bank, while credit rating agency Moody's, which downgraded its outlook for the company's ability to repay its debts last week, said Phones 4u had £205m in notes due by 2019, £430m due in 2018, and a £125m revolving credit facility.

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