Dr Steve McCabe – Birmingham City Business School 

Fascinatingly the person who founded the company Phones 4u John Caudwell, who sold it for £1.5 billion in 2006, became involved by a mixture of accident and pragmatism. He was a car dealer and wanted a way to contact prospective buyers. So in the mid 1980s he discovered that mobile phones did exist but were phenomenally expensive; he was offered one at £1,600 (about £4,500 now). Being the ‘wheeler-dealer’ he negotiated to buy two which would have reduced the price to £1,350 but only on the proviso he became a dealer which meant he bought a crate (it’s important to be aware that they were like bricks in those days).

Though it apparently took Caudwell nine months to sell this consignment at £2,000 each he was an early pioneer of the mobile phone revolution. As they became much cheaper we all wanted to own one (many of us now own multiple handsets) and allowed Phones 4U to become a high street brand which, when he sold it employed over 10,000 people and had sales of more than £2.25 billion. Sadly, for the almost 5,600 employees of Phones 4u’s current owners, private equity owner BC Partners, there is no happy ending.

The ever-savvy John Caudwell is reputed to have realised that the market for selling mobile phones was becoming saturated. Increasing competition among the providers coupled with greater regulation over the charges that companies can make appears to have been the basis for Phones 4u’s demise. Major players such as Vodafone, O2 and EE, all of which have their own retail outlets have decided that by withdrawing from their contract with Phones 4u they can take out a significant competitor. Resonant with a line from one of The Godfather films, it was nothing personal – just business.

The major networks are, it seems, attempting to control the sales of their products and services so as to generate more profit. Indeed, as BC executive Stefano Quadrio Curzio has acknowledged, the way in which Vodafone behaved in withdrawing the ability of Phones 4u to sell its contracts “appears to have been designed to inflict the maximum damage to their partner of 15 years,” and has not allowed any ability or time “to develop commercial alternatives.”

Such behaviour would seem to be the way of modern business; ‘dog eat dog!’ Long-term relationships have no particular meaning and you simply do what is best for your own immediate needs. There is no sentiment. Moreover, what the key players appear to want to do is to remove the high street retailers who offer choice between different providers. What has happened to Phones 4u is similar to that of the other major third-party retailer, Dixons Carphone which was created through a merger between Carphone Warehouse and Dixons the electricals retailer.

As Phones 4u recognise, without anything to sell you have no business. Though there is no law that says a company must supply to another it does seem a pretty shoddy way to treat another company with which you have traded for a number of years. The next time you see advertising by one of the networks proclaiming their commitment to customer service you might give a thought to the people employed by Phones 4u who are likely to be without a job.

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Dr Steve McCabe

Dr Steve McCabe

Birmingham City Business School
Dr Steve McCabe

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