Death of a salesman

SHOPPERS have become accustomed to the demise of British high-street fixtures. Stores like HMV and Blockbuster fell victim to rapid technological change in the music industry and the film-rental business, respectively. But the collapse of a large independent mobile phone retailer, Phones 4U, announced on September 15th, still came as a shock, the more so as it seemed to be in a good market. Administrators are now scrambling to find buyers for the company’s 550 stores. About 5,600 jobs are at stake. It is the biggest high-street casualty since 2012, when Comet went under.

The immediate cause of Phones 4U’s collapse was the decision by Britain’s biggest mobile-phone operator, EE, owner of the Orange and T-Mobile brands, not to renew a contract to sell its products in Phones 4U shops. This followed a similar decision by Vodafone earlier this month. Phones 4U had already been deserted by two other operators, O2 and Three. Thus, in spite of revenues of £1 billion ($1.6 billion) last year, as David Kassler, the chief executive of Phones 4U put it, “If the mobile network operators decline to supply us, we do not have a business.” The current contracts expire next year. This leaves only one independent mobile-phone retailer on the high street, Dixons Carphone, itself a recent merger of Dixons, an electrical retailer, and Carphone Warehouse. Shares in Dixons Carphone rose on the news of its rival’s demise. It has offered to take on hundreds of Phones 4U’s former employees.

A war of words quickly ensued. An angry John Caudwell, the flamboyant billionaire entrepreneur who founded the business in 1987, before selling it for £1.5 billion in 2006, blames Vodafone and EE. Though he no longer has a stake in the company, he says the operators “assassinated” Phones 4U by withdrawing their business from the retailer, thus knocking a competitor out of the market. He, and some independent commentators, have asked regulators to investigate.

Vodafone and EE both deny any wrongdoing, and instead blame the current private-equity owners of Phones 4U, BC Partners, for leaving it short of financial wiggle-room when it came to negotiating the new contracts—a point conceded by Mr Caudwell. BC Partners, which bought the business in 2011, took a special dividend of £223m out of it last year, adding still more debt to a company that was already heavily burdened.

Beyond the conspiracy theories, however, it is clear that, like HMV and others, Phones 4U also failed to adapt to a changing market. For some time the mobile-phone operators have been building up their own retail networks in order to deal directly with the consumer rather than going through middlemen like Phones 4U. In April Vodafone announced that it would open 150 shops, bringing its total to more than 500. EE already has 520 stores. Selling through their own outlets enables them to capture more of the margin on their own products, says Nick Bubb, a retail analyst. Indeed, Vodafone and EE could yet buy up hundreds of Phones 4U’s former stores from the administrator. That probably won’t improve Mr Caudwell’s mood much, but would be welcome news to thousands of the company’s staff.