O2 ends contract sales through Phones 4U

Mobile phone operator O2 is to end its contract sales relationship with Phones 4U as it focuses on increasing sales through its own high street stores.

From April 1, O2 will no longer sell contracts to potential customers via the third-party retailer. Phones 4U will continue to sell O2 prepay mobile phones and upgrades to existing contract mobile phone customers.

A spokesman for O2 said the company is focusing on generating sales directly through its own stores portfolio. Following its acquisition of The Link last year, it upped its high-street store numbers from 300 to 400.

'We have spent the past year building up our retail presence and have emphasised pushing sales there,' said the spokesman. 'We know our customers better and it cuts the costs of commissions.'

As the UK mobile phone market reaches saturation point, operators are increasingly focusing on customer retention.

The operator renegotiated its contract with Carphone Warehouse last month to get higher volumes of customers at improved costs to the company.

Mobile phone operators are concerned about inconsistent commission rates offered by third-party retailers. Last year, Vodafone dropped Carphone Warehouse and signed an exclusive deal with Phones 4U to sell its contracts.

It is understood that operators T-Mobile and Orange may be the next to trim back the volume of customers gained through independent retailers.

O2 added that it's relationship with third-party retailers remains important and declined to disclose whether it would further reduce its volume of sales through the channel.