UPDATED: Phones 4u collapses into administration after EE ends contract

The decision by EE follows a similar one by Vodafone early this month, which leaves Phones 4u without a mobile network partner when EE’s contract expires at the end of September next year.

Administrators at PwC have been appointed today. Phones 4u, which is owned by private equity firm BC Partners, has 550 standalone stores and about 160 concessions. It employs nearly 5,596 staff in total.

All stores have been shuttered and PwC said its priority is to engage with interested parties.

The retailer said the decisions by Vodafone and EE were unexpected and came as a “complete shock” to the business.

Phones 4u said: “The company is in a healthy state and both EE and Vodafone had, until very recently, consistently indicated that they saw Phones 4u as a long-term strategic partner.”

The retailer, which is responsible for more than one in every five new phone connections in the UK, has a turnover of over £1bn, EBITDA of £105m in 2013 and significant cash in the bank.  

“However, following the decisions of Vodafone and EE, Phones 4u has no option but to seek the appointment of administrators from PwC,” it said.

Phones 4u stores will be closed pending a decision by the administrators on whether the business can be reopened for trading. 

Phones 4u chief executive David Kassler said: “Today is a very sad day for our customers and our staff. If the mobile network operators decline to supply us, we do not have a business. A good company making profits of over £100 million, employing thousands of decent people has been forced into administration.”   

“The great service we have provided should have guaranteed a strong future, but unfortunately our network partners have decided otherwise. The ultimate result will be less competition, less choice and higher prices for mobile customers in the UK.” 

Rob Hunt, joint administrator and PwC partner, said: “This is a very sad day for the business and the many people working there. In light of our impending appointment the directors understandably took the decision to close all the shops today and sent many staff home. 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. The stores will remain closed while we have these conversations.

“We will also be talking to network operators and suppliers, and trying to access funds to pay for the costs of the business, including wages. These conversations will determine whether we can re-open stores and trade, and also if and when we can pay the arrears of wages to employees. Our hope is that we will be able to pay all the outstanding wages arrears.”

BC Partners representative Stefano Quadrio Curzio said: “Vodafone has acted in exactly the opposite way to what they had consistently indicated to the management of Phones 4u over more than six months. Their behaviour appears to have been designed to inflict the maximum damage to their partner of 15 years, giving Phones 4u no time to develop commercial alternatives.   

“EE’s decision on Friday is surprising in the context of a contract that has more than a year to run and leaves the board with no alternative but to seek the administrator’s protection in the interests of all its stakeholders.”   

Meanwhile, Phones 4u founder John Caudwell, who sold the company to BC Partners for £1.5bn in 2006, accused Vodafone of acting ruthlessly and urged a boycott of the firm.

He told The Telegraph: “There’s a lot of ruthlessness being applied and if the public actually felt strongly enough they know what they could do, they could vote with their feet and move their business to other networks.”