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P4U’s collapse sparks bitterness against network operators

Dixons Carphone was handed a pre-Christmas gift on Sunday night when the last of the mobile phone operators cancelled contracts to sell devices through Phones4U’s chain of shops and forced it into administration.

The decision by Vodafone and EE, following similar moves by Three and O2, sparked a backlash against the network operators from the collapsed firm’s billionaire founder John Caudwell and its current owner, the private equity firm BC Partners. This, however, looks like another consequence of the restructuring retail sector.

P4U is not a victim of retail distress – it was making £100m of profit – but of what Caudwell described as a “ruthless” decision by its partners. It has certainly proved fatal. With no contracts with the network operators P4U was left with a big high street presence and no business.

The closure of P4U has angered those who accuse the network operators of trying to squeeze the independents out of business and sell directly to customers. However, Vodafone renewed its contract with Dixons Carphone yesterday, not only defying that theory but also providing a further fillip to Dixons Carphone’s already rising share price.

The sudden demise of P4U is a sad end to a business that had become a stalwart of the high street since the charismatic Caudwell launched it in 1987. When he cashed in his shares for £1.5 billion in 2006 in a sale to BC Partners the chain was still selling 26 phones a minute and employing 10,000 staff generating sales in excess of £2 billion. On Monday, 720 P4U shops were shuttered and the 5,596 staff were sent home. There are 45 stores in Scotland employing 292 staff.

The decline of the independent sector seems to have been behind Carphone Warehouse’s decision to throw in its lot with Dixons in a £3.8 billion merger of equals. The companies hope that by combining the sales of phones, computers and other consumer electrical products under one roof it will have a greater chance of survival. This week’s announcement abut P4U has tightened that grip.

There may yet be a reprieve of sorts for what is left of P4U. PwC was appointed administrator at the weekend and last night said it was hoping to reach a deal with interested parties who have expressed an interest in all or part of the business.

Dixons Carphone looks to be in pole position to acquire some of the stores and provide jobs for some of those thrown out of work. Ironically, EE and Vodafone may also buy up some outlets. EE accounts for half of P4U’s £1 billion sales while Vodafone takes care of a quarter.

Shoppers who have become familiar with the proliferation of mobile phone shops will begin to notice the shrinking of the choice available in the coming weeks when Carphone moves into the Currys and PC World shops owned by Dixons. Some of the bigger stores, including the one in Edinburgh’s Princes Street, will be closed temporarily for a refit.

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