Phones 4U is in administration – what does it mean for you?

On Monday Phones 4U went into administration, with its 550 stores now closed for business. The sudden closure is due to mobile phone networks refusing to the do business with the company leaving it without a product to sell. Two weeks ago we reported that Vodafone had become the latest mobile network to abandon Phones4U and last night EE’s refusal to extend its deal with the company proved to be the final nail in the coffin.  

Phones 4U also includes online-only retailer Dial-a-phone, and that company is equally affected. Both websites were closed this morning, showing only a basic text message with customer support details. The company is currently in administration with accountants PwC appointed. It is still unclear what all this means for the 5,600 Phones 4U employees at present but there has been some good news from Dixons Carphone.

The retailer, which encompasses Carphone Warehouse and Currys PC World, said that around 800 Phones 4U staff working on concession stands in its stores would be offered new roles:

“We can confirm that we will be offering jobs to all 800 of our Phones 4U store-in-store colleagues within Curry’s PC World stores with immediate effect. We are recruiting for a further 1500 vacancies across Carphone Warehouse and welcome enquiries from anyone interested in applying for these positions.”

Why has Phones 4U gone bust?

The closure of Phones 4U is unusual because the company is actually profitable, claiming profits of £105 million last year. With the iPhone 6 just being released the future looks pretty bright for retailers of handsets but that isn’t the case for Phones 4U. The mobile networks themselves are looking at ways of becoming more profitable and one key to that is selling more contracts and phones direct to customers, rather than through retailers.

The closure of the company leaves Carphone Warehouse as the only big high-street retailer selling phones with contracts from a range of suppliers – it recently merged with the Dixons Retail group (see Dixons Carphone Currys PC World Warehouse opens after £3.8 billion merger). It seems that the networks are trying to protect profits by quashing competition and only handing out contracts to a smaller number of retailers.

John Caudwell, who founded Phones 4U in 1987 and ran the business until 2006, said: “It feels to me as though these networks are acting in unison. It’ll be good for the networks ultimately but it can’t be good for the customers, taking all that freedom of choice away.”

The networks look to have been motivated by the recent high costs of 4G licenses and possibly the European crackdown on roaming charges, both of which will have eaten into profits. Whether the closure of Phones 4U will help is hard to say. Despite negotiations the retailer and networks couldn’t come to a deal that worked for both parties – EE’s negotiations with Phones 4U reportedly broke down in July.

In a statement EE said: “In line with our strategy to focus on growth in our direct channels and to move to fewer, deeper relationships in the indirect channel, and driven by developments in the marketplace that have called into question the long term viability of the Phones 4U business, we can confirm that we have taken the decision not to extend our contract beyond September 2015. We will monitor developments and work to provide any necessary support for customers who joined EE through Phones 4U.”

One of the problems faced by phone companies is the cost of decent handsets, which has dropped dramatically in the last year. The best way to buy a new smartphone now is undoubtedly to purchase a SIM free handset such as the excellent new Moto G and then get a 12-month or rolling SIM-only contract. This is far cheaper than taking out expensive two-year contracts for high-end handsets. Cheaper handsets such as the Moto G means more customer freedom, less expensive insurance costs and lower overall cost of ownership. Good for consumers, less so for retailers and the networks.

What now for Phones 4U and Dial-a-phone customers?            

Current customers who have contract deals from Phones 4U will be unaffected by the change. Your phone will continue to work and you’ll pay your bill in the normal way. This will include any discounts you have on your account for customer loyalty. Insurance policies will also be honoured and you can make a claim by phoning customer services on the numbers below:

• Phones 4U Customer Service 0844 8712253 
• Dial A Phone Customer Service 0844 8712251 
• Phones 4U Care (Insurance) 0844 8710535 
• Handset Repairs 0844 8712269 
• Technical Support 0844 8712233 
• LIFE Mobile Customer Service 08443 221133

If you have ordered a phone recently, and it has been dispatched, then you will receive it and your contract will be in effect as agreed. If your phone has yet to be dispatched, then your purchase/contract will be cancelled and you’ll receive a refund if necessary. If your phone was being repaired please phone customer services to find out what will happen next.