They are making profits of over £100m...
EE and Vodaphone want that £100m...
Phones 4u fell into administration late on Sunday, after carrier EE cut its ties with the UK retailer. The company said in a statement that's EE's "unexpected" decision not to renew its contract with Phones 4u meant the High Street business would be without any mobile network partners. EE's withdrawal from that deal, which …
There is a class of middle-men (Carphone Warehouse, Phones 4U, Buymobiles etc) that exist between the mobile networks and many of their customers. These retailers are very expensive for the mobile networks, the networks have always resented their existence and have always thought that the profits being made by these people are rightfully theirs. The trouble is that many customers keep using the third party retailers rather than the mobile networks own direct sales businesses. This is because of the astounding level of incompetence of the networks' own in-house retail businesses. The networks are unaware of the level of their own incompetence at retail, which has made this very hard for them to fix. (Phones 4 U are pretty awful themselves, so their continued existence kind of baffles me, but they and the other third party retailers are providing *something* that the networks themselves are not).
It has always been inevitable that the networks would at some point squeeze out the third party retailers by simply refusing to do business with them. This explains Carphone Warehouse's attempts over the last few years to transform itself into a general consumer electronics retail business, variously by stocking other products in its shops (remember when they were full of laptops?), doing an ultimately disastrous deal with Best Buy, and ultimately through a merger with Dixons/Currys/PC World. I am not sure that this means better service for customers - in fact I am pretty sure it means worse - but that's where we are.
"People also seem to want some advice as to which network and contract to choose from someone they think is a bit independent, though the level of advice from these establishments is pretty poor."
Indeed, that would be quite a nice service. Something like a price comparison website, which already exist in this space :-)
Problem with Phones 4u etc is that they were basically a reseller instead of a referrer. Always struck me as a strange business model to still have today - you wouldn't go into a shop to buy an energy or bank account.
Absolutely. This is the last hurrah of the original licensing and regulation back in the 80's when the networks were split from service provision the end users. This led to a whole raft of independents which did very well while it lasted. When the regulations were changed in the mid 90's all of the independents were essentially doomed. The networks brought the service providers back in house and made it the primary route to market (Vodafone/Vodac for instance). You only have to look at the number of network owned retail outlets vs the independents to realise that the writing is on the wall.
The trouble is that many customers keep using the third party retailers rather than the mobile networks own direct sales businesses. This is because of the astounding level of incompetence of the networks' own in-house retail businesses. The networks are unaware of the level of their own incompetence at retail, which has made this very hard for them to fix.
As alluded to by others, you need help to identify the right package for you because the companies have always actively worked to avoid clear like-for-like comparisons, a tactic that started when BT was forced into a duopoly with Mercury. The mobile companies have simply adopted these tactics because they were allowed to get away with it (and still are). This confusion is what forms the lifeblood of the resellers.
If the EU wanted to make a difference on the telco front, all it needs to do is somehow force honest comparison, because only then you'd get honest competition that benefits the user.
If the EU wanted to make a difference on the telco front, all it needs to do is somehow force honest comparison, because only then you'd get honest competition that benefits the user.
It would be like that totally pointless "MPG on the EU cycle" figure that car manufacturers have to publish, even though it bears no relation to real-life usage.
We do not need more political interference in helping us choose things. If there is a need, the market will fill it. When Phones4U started the high street was the place to find such info, taking commission from the suppliers, now the web provides it, funded by advertising from the suppliers.
"It would be like that totally pointless "MPG on the EU cycle" figure that car manufacturers have to publish, even though it bears no relation to real-life usage."
It doesn't matter that it bears no relation to real-life usage. What it does do is provide a comparison between two different makes/models, using one standardised baseline, so comparisons can be made.
Just like NCAP stars, 0-60 times, etc. they're just numbers to compare one to another to see which is "best".
Phones4U and the equally revolting Carphone Warehouse at least sell unlocked handsets - the networks want locked handsets so they can 1) install their own rancid bloatware and 2) have a slice of all your international calls when you can't just swap SIMs. It's why no bugger sells dual-SIM phones in this country when they're hugely popular the world over.
Yes, although the systems for cars could be gamed by the manufacturers such that performance cars (like one I had) had noticeable dips in the power curves at 56mph and 70mph in order to save fuel for the tests.
Hence the 'super' chip replacement industry which gave you back the curve that should have been there (and often added boosts your engine or the environment wouldn't appreciate).
Still, I get that they can learn and produce something like 'urban cycle' that is harder to obfuscate.
Personally, seeing various plans of calls/text/data/period/cost seem fairly obvious to me. Firstly, one is choosing an amount of money that one would spend at the most. For instance, I noticed that there is a new iPhone due and Phones4U sent me an email saying I could get the cheap one free for only 50 pounds a month or so over two years.
Well, since I was paying 8 pounds a month (7 now) for not-too-much-data/lotsa-texts/nuff-calls, with a phone that is premium but cost about 12/month for 2 years all the same, I figured the extra 30/month was overpriced for losing wireless charging and getting a less good camera etc.
However, comparing 7/month for 200mins/unlimited/500MB against a special-for-me 8/month for 600mins/600/600MB was easy. It is based on the fact that I would likely never run out of calls, even at 200 mins but could use 600 texts in a bad month (I have teenage children and a gf so it can be serious). The minimal data is ok for me because I have built-in maps and utilise WiFi a lot (and because I don't watch much video, especially when not at home).
These considerations are basically common-sense, in that everyone can reasonably make those choices. I actually switched because EE suddenly decided to break their data network and give me nothing or pitiful data connections for weeks on end without fixing it despite a dozen attempts (yes, I put the SIM in another phone, YES I have restarted my phone, YES, I DID clear my cache - for 2 months, unbelievable), it wasn't for the 1/month.
The guy I know who says "Oh, I pay 31/month but I get huge/huge/infinite" is just deciding that paying 12/month extra removes (some) worry about exceeding limits or not having data etc. To me 12/month pays for my TV licence or half my broadband, it is real money as far as I am concerned.
It doesn't matter that it bears no relation to real-life usage. What it does do is provide a comparison between two different makes/models, using one standardised baseline, so comparisons can be made.
But the comparisons are meaningless, because the baseline is unrealistic, and the manufacturers distort the ECU map so much to score highly that it damages the car's performance in real conditions.
What you get are "official" figures that show that Car A does 50 mpg on the test, Car B does 45mpg. In real life Car A does 37mpg, and car B does 39 mpg in average conditions, and when you get them remapped by a professional tuner they both go up to 45mpg (but would then fare worse on the EU tests).
How has the standard comparison been of any use whatsoever? All it shows is that manufacturer of Car A is better at fine-tuning the ECU map to optimise the engine for an imaginary journey, but at the expense of poorer figures in other circumstances. The ony place to get meaningful comparisons is from the car magazines and web sites who use the car in real conditions for several weeks or months.
That's all very accurate but rather irrelevant to what is happening, as according to the article, they merely swapping one middle man for another.
Little as I like to see 5 thousand people jobless just because the networks figured out they can boost their profits by few millions by changing contractors, fact is, they are in no way obliged to continue any sort of commercial relationship with anyone beyond the contractual terms. It's a risk, any middle man/company takes when tying themselves exclusively to certain type of business.
I can only hope, this isn't a cheap but effective attempt to sink the market value of Phones4U before approaching with a buy out offer tailored to the buyers needs only to then emerge as a saviour ;)
Though frankly, nothing will surprise me anymore.
It's ironic that they tried to sell you Voda when Voda were first in with the knife.
My high street, and yours probably, is mainly phone shops, estate agents and card shops. All three types of business are barely required to exist let alone proliferate. Charity shops proliferate too but that is because we are so busy creating an larger and larger underclass that we need more shops like them (and the pound/99p shops obviously).
In terms of efficiency and thus ultimately lower prices, a 3rd party shop or two would be better (we have Three, EE, Voda and O2 I think) but I take the point that the EEs and Vodas would rather run a chain of shops with fewer sales and take all the money, although shops look expensive to own and operate I presume they did some sums.
Personally, I used Phones4U when forced to by wanting a Nokia 920 so badly. One visit, paid full price, never returned - not a terrible hardship.
I must admit to wondering why people really do need phone shops at all, even when they are not technical types. Reading reviews, word-of-mouth etc. should really be sufficient. In the event that you hate the phone, you can just return it after all, two weeks ownership is plenty if 30 minutes in a shop is plenty.
"That and the fact they pay a much lower business rate than a "standard" business, gives them a competitive advantage."
Not forgetting tax breaks, cheap (often free) labour and usually free stock. It's no wonder there are so many charity shops and personally I've stopped donating/shopping with them all as other retailers cannot compete with those terms and it's driving local shops out of business.
In reality, it's probably more than that. If the £100m is a net profit, then the real profit (or more specifically money the networks could save) is more since the net would include the huge overheads they'd have.
Only the foolish would believe networks wouldn't dispose of the "partners" once they've achieved critical mass.
> "A good company making profits of over £100m, employing thousands of decent people has been forced into administration."
There is something rather fishy about this statement. If they were making that much profit then it may be true that they are being forced into an orderly winding-up of the business but being forced into administration means they've made a loss and there are creditors looming.
"There is something rather fishy about this statement. If they were making that much profit then it may be true that they are being forced into an orderly winding-up of the business but being forced into administration means they've made a loss and there are creditors looming"
I suspect it's more to do with hurting their former partners' businesses publicly and as much as possible. There's nothing for them to gain in simply bending over and quietly taking a rodgering. If it's happening anyway, may as well burn those bridges and try to lose EE and Voda some customers in the process.
That's how I'd play it at this juncture, anyway.
Other reports suggest that Phones4u was owned by a bunch of hedgies. Those vultures (no, not you, Reg!) issued bonds for a lot of money, took the money for themselves, and left the company to repay the bonds out of future earnings. The interest payments on those bonds killed the company.
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I hope it is because of how awful they are to deal with.
(And how it is the company policy to waste as much of the customers time as possible by the way the systems are designed).
Before they do any of the messing around only they seem to need to do they should check the price.
The sales tactics are incredibly obnoxious.
They once refused to sell me something they had advertised on the window for a set price took about half an hour messing about and said the price had changed right at the end. (I just walked out and paid £20 more from Carphone Warehouse about 20m away and spent only 5 mins doing so).
They once refused to sell me something they had advertised on the window for a set price took about half an hour messing about
I admire your patience. In such shops you're lucky if I last more than 5 minutes, and I have an extremely low tolerance for BS. Generally, I indicate that at the very beginning - the right salesman than stays with my needs, the idiots still try the upsell and lose the business.
I made the mistake of wandering into one of their branches several years ago to try and buy an unlocked handset. The sales slug couldn't believe somebody could be so demented as to want such a thing and pulled in a second sales slug to help teach me the error of my ways and to show me the contract I actually wanted (never mind the fact I had asked for something specific that the shop allegedly had for sale). After a couple of minutes of obnoxious high-pressure sales pitch I thanked them for their time and walked out but I can see how some people fall for it.
Carphone Warehouse were angels by comparison, at least they would sell you an unlocked phone without arguing and the larger branches had powered-up models you could play with so that expensive purchase was less of a pig in a poke. I say "were" because, well, you know who owns them now...
That will be another empty shop in the high street.
The big players will carve up the worthwhile shops out of the 550 and then ditch the rest.
Sad times for Phones4U employees. Although I have to admit the writing was on the wall because I wasn't exactly sure how they continued to exist when all the big players sold directly to the public.
"In line with our strategy to focus on growth in our direct channels"
So, they're openly saying its to take the business themselves. I've always wondered how places like Phones 4U survived and where the profits came from, but the whole thing seems anti-competetive (I don't know if it would class as that though because I guess you vould class them as parasitic rather than competitors in a way). I also think that if the customers want to go to Phones 4U then they should be able to. This move is only good for EE. Certainly not for the customers or for the staff at Phones 4U.
I know that Phones 4U had a pretty horrible reputation at one time but I bought my last phone from them (and so did my dad) and they had completely turned that around. The customer service was excellent.
The customer service at EE on the other hand is shocking. The stores and 'customer service' centres alike are useless.
If I could make a suggestion to Phones 4U it would be this. I've recently fallen out with EE over the length of time it took them to approve the Cyan update for my Lumia, and I know Android owners in the same boat. I'm in the market for a SIM free, unlocked phone that gets updates directly from the manufacturer. Many places on the web are touting the benefits of buying a device outright and getting a SIM only deal from the network - maybe use some of that cash they have in the bank to get such stock in, see if they can operate that kind of model. Like Clove, but where you can go in, try the handsets, compare the size and get advice from someone in person. I'd go there and, if they gave me the same service as they did the last time I was there, I'd go back afterwards too.
There must be a market for that and if not, I'm sure one could be cultivated.
You could get an iPhone from Apple, John Lewis etc. Unlocked and sim free.
You get the updates from Apple and there is no carrier bloat.
Yes, I know this is heresy but the poster asked a question...
There are some Android equivalents that others will be sure to mention.
don't buy your phone from a carrier. go for SIM Only deals on say a 1 month rolling contract. Then when the carrier pisses you off, you can move to another without the unlocking hassle.
don't buy your phone from a carrier. go for SIM Only deals on say a 1 month rolling contract. Then when the carrier pisses you off, you can move to another without the unlocking hassle.
Not to mention that its also WAY cheaper in the long run as well. Sure you have to have the outlay for your Phone first though. But, what an iTard Contract go for these Days? £50, £75 a Month? Try working out what that is after Two Years!
Try working out what that is after Two Years!
£50PM = £12000
£75PM = £18000
Wow, that was easier than I thought, and I did it without a calculator.
Of course your idea of how much a contact costs is way off the mark, but don't let facts get in the way of your posting.
There are Android contracts at similar prices to iPhone ones.
Vodafone 3g contract
Samsung S5 black £44.50/month Free phone,24 month 4Gb Data on 3G
apple iPhone 6 £48.00/month free phone, 24 months 4Gb data on 3G.
Not so different really.
It's still £84, which isn't a trivial amount, and whilst the point about iOS updates is fair enough, I prefer Android for it's much greater flexibility, better hardware functionality etc etc.
I can't be bothered getting into the wider iOS v Android v WinPhone debate here, but a blase comment about one of the few benefits of iOS is largely irrelevant when most people will base their decisions on other things.
I myself buy my phones outright and then have a very cheap rolling monthly contract, and the amount I get for my old phone always covers the bulk of the cost of the replacement.
I dropped EE recently, and bought a 32GB Nexus 5 direct from Google's play store, and switched to Giffgaff.
I went from about £37 a month, to £12 a month (plus the initial £339 for the phone), for essentially the same service. (Speeds are actually faster, especially uploads on 3G).
Now I get the most recent updates directly OTA, usually within a few days of the release date.
Can't see me ever going back to a branded phone again, although I will probably move from service provider to service provider as needed, keep em on their toes...
Android Silver also looks interesting for future phones and tablets, although Google have stated the Nexus range will continue as well.
> apple iPhone 6 £48.00/month free phone, 24 months 4Gb data on 3G.
Except that is for a 16GB model, almost unusably small considering there is no data card.
Since the next size is 64GB, the price moves to £53 on one I saw.
53 vs 44 is, in fact, quite a big difference, about 20% more.
And, the S5 is over-priced, there really are phones as good or better depending on your view, for much less money.
RipOff Britain, I say ... Who in their right mind pays over € 20/month for unlimited sms/calls and 20Gb/LTE ? (without handset).
That is what I pay (actually, I pay € 16, coz I have DSL from same vendor), so I was happy to shell out full retail price for my BB10 z30, directly from manufacturer so I get updates quicker, no provider crapware.
R E V O L U T I O N
'I'm in the market for a SIM free, unlocked phone that gets updates directly from the manufacturer.'
You've not heard about the iPhone then?
You can even buy then Sim free is you want.
I buy the phone, yes it is expensive but I change the phone every year, selling the old one which has superb resale value. I get at least 60% of the original outlay back especially as the phone is looked after and in nearly new condition.
The Sim only deal I have costs me less than £250 a year.
No having to wait two years to upgrade and all updates are on time and free. Add the cost of the phone into the equation I save a fair bit of money in the long term.
Android phones don't have that sort of second hand value
If you switch off your reality distortion field for a moment you would find that most top end android phones also keep their resale value.
Given that I probably spend half as much money for my similarly-speced phone than you, and can get a decent sim-only deal that gives me unlimited calls and data fro less than half what you pay, then I would say you are not saving as much money as you believe.
Not sure this accords with basic economics
You are saying that iPhone users replace their phones more regularly. This implies that there are lots of "last year's phones" around. At least some of these must make their way into the second hand channel (rather than sitting in the back of a draw), so there should be lots of second hand phones. If there is a big supply of 2nd hand iPhones then basic economics would suggest that this should depress the price.
On the other hand you are saying that Android users don't care about having the latest model, they just want to use a phone. Therefore they should be more likely to want to buy last year's Samsung, thus increasing the demand for used Android phones and raising the price.
Thus your argument that iPhone users are fashion victims desperate to replace their phones the instant a new model comes out would suggest a world when the world was awash with second hand iphones at bargain prices, while canny and thrifty Android users were having to pay through the nose for those rare-as-rocking-horse-sh1t second hand Sammys
I don't think this is where we're at.
I would suggest that the 2nd hand price for Apple kit holds up well because
a) they are very well made
b) there only a small number of models so apple can continue to support them all
c) the latest version of iOS is available on all models released in the last 4 years or so.
Not sure I would want a 2 year android phone that the manufacturer has long forgotten about with no chance of a software upgrade ever again.
I'm in the market for a SIM free, unlocked phone that gets updates directly from the manufacturer. Many places on the web are touting the benefits of buying a device outright and getting a SIM only deal from the network
That's because it involves less capital investment from their end. When you get a "carrier locked" phone they subsidise the phone, which costs them upfront money which they reclaim through your subscription (one of the reasons you have minimum contract durations). By using their volume discount on phones they can offer you the phone a bit under retail and move the capital investment to you. It removes business risk in an uncertain economy, so it's not really about *your* benefit, but *theirs* (not that that ought to surprise you).
I'm actually looking at a Nexus - debating whether to wait for the next one or jump in before the current one disappears. The Moto X would also be a contender.
I've heard of the iPhone. I know the resale values are good, but the initial price is steep and my last two Android phones have outlived the last two iPhones in our household. The most recent one, the battery is swelling and popping the screen out, and we could buy a Moto G and have change for the cost they want to repair it.
My point was that the isn't anywhere local where you can view these, buy them and get support, but there's a business for it. In the absence of carrier support and with cash in the bank, there *might* be a business in there somewhere. They might have to scale down for a while, but its better than dying off.
"The great service we have provided..."
My first and last contract through them was when I'd just come back from a few years overseas and didn't quite have the lie of the landscape. The customer service, knowledge and competence on offer was quite the equal of Dixons, so roughly speaking, grasping, clueless and half-baked. The only way I'd do it now is get the handset up front, understand the nitty gritty of what the networks are offering and buy a SIM only from them via their site, picking up a bit of cashback from someone like Quidco (good payers in my experience) if the timings right. Its one industry where the fewer people you actually talk to, the better it works out. My girlfriend worked for one of the networks for a while, and I have to say it was a real eye opener. I'm surprised they manage to open retail outlets at all, let alone process orders.
Where decent service exists on the high street, its far from any business with more than a half dozen branches, and is like as not either something vaguely specialist like art materials, or someone who's been there forever like my local ironmonger who really does seem to be from another era in all respects. The rest are just utterly depressing. No wonder online has largely won for retail and high streets are increasingly empty - really sad, but identikit businesses like phones4U carry the bulk of the blame for making visiting a shop an unpleasant and frustrating experience that invariably incurs extra cost for no benefit.
Alternatively, it's online retail with it's much lower costs that has forced high street retailers into a race to the bottom on customer service. Greedy councils and expensive town centre locations are bad enough, but giving customers money back when mistakes happen and employing helpful and knowledgeable people (and paying them enough to keep them) is a lot more expensive than box shifting at a warehouse where anyone thinking of returning something has to be willing to wait on a phone for 15 minutes and pay money to post the item back.
I think its arguable which actually drove the other. Indifferent service and knowledge free staff were already a well established feature of the high street long before online sales had begun to really bite. By the time online really got running there was little love left for most high streets, except for those whose planning commitees took a longer term view on shaping their towns when it came to applications.
Jessops was always my bellweather, simply because I bought my film and paper stock there once a week or so. By the mid nineties the consumer section of the New Oxford street store had pretty much lost the plot and descended to Dixons level, although two or three of the pro staff downstairs were excellent till even they left 10 years ago or so. A real shame, because in the past staff there had perfomed minor miracles for me with pushing repairs and bulk orders. Good photographic shops do persevere, but they're certainly not chains.
By the time Amazon had started to really make a mark beyond books there were few compelling reasons left to show any loyalty to anything but small local shops, but they weren't immune either. Our previously thriving local fruit and veg market diappeared almost overnight with the arrival of a third large (and largely unwanted) supermarket close enough to take custom, but far enough away to make visiting both too much for most people.
I'm not sure it would eventually have ended any other way, but the 80s move to deciding that anybody could sell anything given a shiny logo, pushy tactics and a script just meant that online retail didn't have to push very hard to gain acceptance, because consumers didn't see there was much to lose.
"I've has my last 6 phones from Phones4U because they have consistently been massively cheaper than the Vodafone shop that's 20 yards from it."
Well there's the problem. However you cut it, selling through intermediaries costs a lot more than direct sales. In a previously growing market with high margins and lots of differentiation, that didn't matter.
But with MVNO's and cheap SIM only deals left right and centre, maxed-out levels of smart phone ownership, and promotion of cheap and competent SIM-free phones by credible brands like Google or Motorola, the major MNOs are starting to find themselves squeezed. Their (in practice) oligopoly for the bundled supply of phones and air time is under attack. And once you get onto SIM free, there's a further nightmare for the big networks - it is far easier to switch. There's no albatross of a part-paid handset to sort out, no locked in two year contracts, and subject only to reception, air time is pure commodity. This then becomes a race to the bottom.
Now consider that Phones4U had turnover of around a billion quid, and that was almost entirely a cost to the major networks - taken together there's no additional income to the networks for the Phones 4U sales, because (the networks reason) punters will still buy the most attractive deal somewhere else.
So squeezing out intermediaries is a financial necessity for the network operators, and what will happen is that a three tier market (that already exists) will become even clearer: PAYG will continue much as it operates now; the major networks will offer increasingly expensive deals for fixed term handset inclusive contracts to those who are not value conscious (or are not very smart); and the value conscious will increasingly start to relinquish contract deals in favour of SIM free handsets and rolling short term SIM deals (much as Tesco's punters are now to be found thronging Aldi and Lidl).
...air time is pure commodity. This then becomes a race to the bottom
They're fast running out of road here on SIM only - you don't have to spend a great deal to get unlimited talktime, and most allowances below that are more than enough for most. While data seems to have stalled its price slide briefly, its still only going to go one way. Which leaves them what exactly left to leverage bigger monthly payments? Nothing that I can see. They've always been pretty awful at addons since the days when ringtones were pimped for silly money, ending not so very long ago, and there are plenty of better ways to get movie streaming than with your network, if you really fancy that on a phone anyway. The EU has cut their legs from under them on european roaming, and prices are dropping for the rest - Three have effectively free roaming in 12 countries I think, including the US and Australia.
Short of them resorting to actual blackmail over coverage its hard to see whats going to prop their profits up.
"Short of them resorting to actual blackmail over coverage its hard to see whats going to prop their profits up."
Too right. But in the light of this threat, you can see why these companies oppose net neutrality (hoping to get paid by upstream content providers as well as their own downstream customers), and why they keep on dancing round their corporate handbags on NFC and mobile payments, hoping to get a cut from the payment processors (ie to get another upstream payment for what is effectively use of system that the downstream customer has already paid for). Obviously on mobile payments they need to have proprietary systems to justify extra charges, and that's why they want to offer crummy carrier-specific solutions, and are hostile to industry standard approaches, where the MNO only gets paid the data rate for a handful of bytes.
The sad thing is that the network operator strategies are all so 1999, still offering mobiles as an unsatisfactory adjunct to fixed line solutions from third parties, and always hoping to find the next big thing without effort or investment. Hoping, Mr Micawber style, as though the initial revenue boom of texting is the sort of reward they might hope to be gifted in future is not a good strategy.
If they'd invest in a lot more capacity they could offer a credible domestic wireless broadband solution that would supplant the wired telecoms and cable companies, opening up a vast new market, instead of hoping that mobile data will suddenly come to the rescue as people decide to watch cat videos on a tiny handset every waking second of the day. But creating a domestic broadband proposition for a lot of multi-occupant households (rather than a few mobile-only singleton hipsters) involves more masts, and meatier backhaul, new propositions - investment, hard work, and commercial risk. Why do that when you're a fat cat incumbent?
"...dancing round their corporate handbags on NFC and mobile payments"
I think there's far too little trust in them for that to be a reasonable possibility, and a fair amount of intense dislike. As you say, its all very 1999, but other than their core business of airtime and connections, virtually every other attempt to branch out has looked antiquated and relied heavily on either a lock in that wasn't as watertight as they believed, or the really, really bizarre notion that consumers read nothing other than mobile industry marketing material and thus hadn't noticed 231 other ways to achieve their latest novelty-du-jour, invariably cheaper, and usually last year.
And indeed, missing the boat several times over as a gap filler for domestic broadband was, and remains, equally perverse. Not least because government on several occasions handed out wads of cash that with a bit of effort could have been theirs. I think the fact they started out for the most part as small businesses that grew very rapidly simply meant while their revenues grew very quickly, their mindset and internal structure was left behind in an eternal defence of their market share without ever looking forwards at where the gravy train was going, or indeed if the rails ran out.
Problem for the rest of us is what happens to capacity, investment and the prospect of expansion when profits tank?
"Problem for the rest of us is what happens to capacity, investment and the prospect of expansion when profits tank?"
Infrastructure regulation is what eventually happens, as per gas or electricity distribution systems. That's very good for preserving things as they are, it's generally poor at supporting fast innovation. Given OFCOM's poor record they'd be particularly dreadful, but other asset regulators (eg OFWAT) have shown that you can offer decent regulation that meets both customer and investor needs, and supports performance improvement.
Most of the legal infrastructure is already in place in the form of having a regulator, having a licencing regime and licenced operators. All that's needed is a bill to make network ownership and operation a fully regulated activity.
Unlimited minutes a quite common - but what they don't tell you is the cost for 0845 numbers. As far as I remember when they were introduced they were supposed to be "local call equivalent" but the networks treat them as premium rate numbers. And when virtually every business uses them and you need to contact them in working hours you can suddenly be caught with a huge bill. (yes I know about the "say no to 0845 app. I just don't see why the networks charge what they do.)
Then there are :
Charges for 0800 free phone numbers.
Charges for picture messages (MMS) hidden away in the small print separate from SMS messages.
Charges for calling to pick up your voice mail.
Let's have open display of ALL the prices so we can compare properly
Very simple really. Share price. Once announced that EE had refused to renew their share price over the next year would tank making the company completely worthless. Remember P4U is now owned by an investment bank and therefore it's in their interest to get as much money out of the business between now and September 2015 as possible. For that reason it's better to pull the plug now than wait a year and end up spending their cash reserves trying to whip a dead horse.
Firstly, the shares will drop like a stone once the news was out that there was a brick wall ahead, and that may affect the way they can generate operational credit. A potentially solvent company operating without credit is doomed to fail (remember what happened to Woolworths).
Secondly, the current owners may want to bail out of the business, and this looks like a simple way of doing it while offloading the hassle of trying to find a new operating model to someone else. The current owners will just become creditors, and will either get some money back if it is wound up, or will get shares in the newly re-invented company if a new operational model can be found.
In retrospect, it's not a surprise, O2 left first, being the smallest supplier of contracts to P4U, basically losing out in most contract comparisons, that left EE and Vodafone, directly competing against each other , both having to effectively discount their contracts with P4U skimming the commission, if they wanted P4U to sell a contract then they would have to undercut the other, EE was pricing Vodafone out so Vodafone left, with EE no longer competing with anyone they had no reason to stay.
Vodafone said "Phones 4U was offered repeated opportunities to propose competitive distribution terms to enable us to conclude a new agreement, but was unable to do so." I assume that the discounts that Vodafone was asked to give (which contributed towards the £100M profit) was too much for them?
Carphone Warehouse I suspect now will be in the same state, with the phone (contract) suppliers being in a strong position to offer only smaller discounts, if they don't agree then they will pull out, while they might hoover up some shops and staff from P4U, there's absolutely nothing stopping EE/O2/Voda pulling out - and if they did it with P4U, there will have to be a good reason for not doing it with CW.
This a great pity. The thing about Phones4U is you got a great choice of phones, especially if you are a PAYG customer, where the choices offered by the in-house retail organisations is frankly laughable.
This is a blatant attempt by the service providers to further carve up the phone landscape, force customers of a PAYG contract to a more profitable contract and ensure it is harder to jump ship.
It is also deeply anti-competitive and I'm pretty sure there will be some sueballs thrown soon.
Whatever you thought of the company, this is definitely a loss to the average consumer.
"It is also deeply anti-competitive and I'm pretty sure there will be some sueballs thrown soon."
On what basis can anyone be sued? There's nothing to force the networks to maintain a business relationship if they decide they don't want to, and it's only anti-competitive in that there are fewer places to buy a phone on a contract, but there is still plenty of choice (in theory) in the market since there are still 4 major operators plus several major 3rd parties both online and with bricks and mortar (CrapPhone DIxons, Tesco, buymobiles.net, mobiles.co.uk spring to mind).
If the operators want to start selling direct-only by cutting out all of the middle-men, they are within their rights to do so, and there are some parallels - most famously Direct Line withdrew from the insurance comparison sites for example (but now have to spend a fortune telling you that in every ad break on TV).
Personally I won't shed any tears over P4U disappearing since my experiences with them have been uniformly terrible (go in knowing which phone and contract I want expecting a pretty simple transaction, only to be pushed towards whichever handset will give them the most commision that day irrespective of whether it will do what I want), but that isn't exactly unique to them.
It may be a shame for many people, and I certainly wouldn't argue that it is damaging to the industry - but IMO there's nothing illegal about it.
I am wondering why they are giving up now rather than looking for alternatives for the remaining year of the contract with EE though.
As consumers we should also be concerned about this. Buying direct for me has almost always been more expensive than going via a 3rd party and often buying through a 3rd party has other benefits such as ready unlocked phones. This is essentially a first step towards direct selling only and higher prices for punters. I say this because phones4u is such a large company itself.
If the EE contract ends next year why are they closing now? I haven't been in a phones4u store for a long time but the last time I was in there, they had plenty of pay as you go phones, tablets and other stuff for sale so i'm sure they could at least run for the next year and try and diversify further to keep the business viable. Sad thing is one of the lasses from my place left to start a job at phones4u today, hopefully our place will giver her her job back.
"the last time I was in there, they had plenty of pay as you go phones, tablets and other stuff for sale so i'm sure they could at least run for the next year and try and diversify further to keep the business viable"
Who'd go into a mobile phone shop that didn't offer mobile phone contracts? Even on PAYG they'd struggle to compete against proper retailers with well managed inventory and supply chain (Amazon, Argos and Tesco, and the only reason they may have been competitive before would be network commissions. So they'd have a quite large shop selling the small range of phone and tech related tat normally associated with a market stall. I just can't see it working.
Also, directors have to sign off accounts declaring that the business is a going concern. Even with a year's notice, who's going to risk being disqualified as a director, or even jail time for fraud in the hope that they can perhaps put together a business selling trinkets?
Without the likes of CW and P4U etc starting up in the 90's, most people wouldn't have a phone. I have never ever called a carrier or visited their high street shop to buy a phone and yet, I have had many mobiles since 1995.
Yes, there has been issues with some of the 3rd parties selling techniques, but if you know what you want and the package suits you, there hasn't been an problem. More often than not, it's the resellers that offer the better deals. Recently my lad wanted a nexus from EE, but they don't do it, however it can be brought from an reseller on a better package that EE had.
Mobile phone companies may be trying to get the sales back in house, but with poor sales staff, lack of phone types on extremely limited deals, everyone will lose out.
Phones4U used to be awful and their marketing seemed to be aimed at the more erm... chav infested end of the market, but they did get better and I bought my Moto E backup phone from them online without any trouble.
Although you can argue that these phone shops such as Phones4U and CPW are just middle men, they did provide one important thing - Unlocked phones on the High Street.
Not everyone has the money for an iPhone from an Apple shop or a Nexus from Google, so giving people the ability to select their own phone and own network is an important thing, and it is a shame that one more shop has gone that provided that. I hope that they do find a buyer and get bought out from administration.
Saying that, the size of some of their shops are ridiculously huge! I have no idea why a shop selling mobile phones has to be the size of a car showroom...
I liked P4U.
Maybe it's because as a tech person I walked in there knowing exactly what I wanted so getting to the point was quick and easy, but I can't say much wrong with them. They've been helpful in the past when I've had dodgy handsets (LG GX2 for example) and have generally been OK with me.
Plus I liked getting bloat-free, network unlocked devices from them on contract.
Is it anything to do with cracking down on insurance scams from the third-party box-shifters?
Have they lost so much from 'mistakely' filling in the 'extra cover' forms for you to sign?
I always thought they must have made more money from that that actually flogging the most expensive contract available.
Aha not so much a Flashing Blade then as one of us Potato Peelers. I know the Huawei G300 quite well and I would respectfully suggest that it is the wrong side of the speed and usability line by now and you might usefully spend the 60-80 quid at Tesco for the non-LTE Moto G.
As far as Phones 4U is concerned I hated it when went there once and failed to buy a phone for one of the kids so never went back. My last three phones came unlocked either from Tesco online or from Chinese websites so I can't say I understand the need for high street phone shops, nor for direct sales from the networks. So long as cheap PAYG continues to be available that is all I need.
If they don't want to be squeezed out, but provide the service then maybe they should give the consumer the choice of handsets and then the SIM is round two; they pick the network they want.
I am fairly sure that if they say look at a different model and forgo the cut (or as much of a cut) from the networks they can instead focus on providing popular handsets, on the highstreet and duke it out with CPW.
Imagine a kiosk where they can order a Moto X customised and delivered to the store on behalf of the customer allowing them to then add the value added bits of setup, training etc to the customer.
If tech savvy punters like us don't give a hoot about hand holding, then fine - but we're not needing that service. My mother on the other hand does...
Just last week I was looking for a new phone and found one, SIM-free, unlocked dialaphone.co.uk, a p4u subsiduary.
After we tried several times to buy it using a company credit card, we gave up and called them. On eventually getting through, we were rather rudely informed that they only sell to individuals, and only sell phones with contracts... not sim-free or unlocked.
A simple mistake, I suppose it was a combination of the words 'sim-free' and 'unlocked', coupled with their Ts and Cs and web site which did not state anywhere that they only sell to individuals which confused me.
A real blast from the past. I remember them as a staple feature of the ads at the back of the Evening Standard and the free handout 'magazines' with a big, blocky logo in reversed out B&W, and usually a whiff of the "add inches to your hifi stack" mentality.
Slightly off topic but a lot of the comments have mentioned buying Sim-free unlocked phones. I don't know why, but here in Switzerland electronics tend to be much cheaper than anywhere else in Europe, and it isn't only the difference made by having 8% VAT
I just got an LG G3 for £342 after converting from Swiss franc price of 520chf. Cheapest sim free in UK seems to be about £480, that is a huge difference even allowing for the difference in VAT.
This is a Swiss price comparison site, in English, for retailers in Switzerland, I guess they have no problem shipping to the UK http://en.toppreise.ch/grp2_194.html
I've had all of my family's recent phones from P4U.
Why? Because my network provider wouldn't give me anything like a decent upgrade, despite spending a fortune with them and all of them have this wonderfully competitive world where their retail shops and their online business operate totally differently with different tariffs and a whole range of smoke and mirrors and BS. Oh and customer service that really is no service at all.
I'd sooner chew off my own arm than use any of that.
On the other hand, P4U have consistently been helpful, better value and genuinely useful.
I for one am disappointed at how these multi-nationals have effectively stamped out competition from my own high street and laid off 5.5k British workers - if this was other industries the government would be telling us how they tried to prevent it, but no, not this. Not the bit where the ordinary people are the customer. I guess Dave and the boys are siding once more with the boards of big business to suck the last drop out of us.
It's very sad for all those who will be made redundant, and I am truly sorry for them, but this outcome was inevitable. The so-called "channel partners" have been gouging the networks for years, and the networks have been in a first-to-blink-or-look-away situation.
If anything, this will improve matters for customers; the antics of the indirect channel have been holding subscription prices artificially high. Look at it like this: Phones4U have been selling other people's products, for the same price those people sell it, but also maintaining a large network of storefronts and staff and still turning a profit. In days gone by, the networks actually made a significant LOSS on contracts sold through the channel and relied on out-of-contract usage to make up the difference.
The contracts bought direct from the operators have thus been *subsidising* the contracts sold through the indirect channel for years. It's about time the artificial upward pressure on prices were removed.
The reason the operators kept on renewing their contracts with P4U and similar was that nobody had the onions to be the first NOT to offer their phones in the ubiquitous stores. Kudos to Vodaphone for pulling out of the unhealthy relationship. The way it always worked was that P4U would demand concessions from a network, and if they didn't play ball you'd find the interiors of their stores reworked overnight to display the competition's offerings more prominently, and the competition's more-lucrative (for P4U) contracts pushed harder. Nothing was ever *said*, of course, but everyone knew that was how it worked.
If that seems craven on the part of the networks, well, it was... but at the same time, shareholders and investors were always focussed on the number of subscribers. Nobody felt like they could afford NOT to distribute through those channels.
It looks like the ever-shrinking margins (and concomitant lack of investment) in the UK's already-notoriously-low-returns mobile market have finally prompted the networks to develop a spine. Margins will increase now that the networks aren't paying for hundreds of P4U stores and thousands of P4U staff (not to mention the IT overhead of maintaining the externally-facing systems), and enough competition remains that some of those savings are likely to reach the customers.
It's a real pity that so many people will be looking for work as a result of this move, but it was always on the cards: I'm just surprised it took this long.
"Phones 4U spent a lot of money in creating there MVNO Life mobile a few years ago, it runs on EE network, like Tesco Mobile, question is ... what happens to that?"
Did they ever trade and sign up customers - I can't see anything that says they had any customers?
If they have any, the administrators will try and sell it as a going concern if it stands on its own feet. But if it isn't viable then it will be shut down unless a competitor quickly decides that the Life Mobile customers can be bought for a lower average cost than acquiring customers organically.
I don't buy a new mobile phone very often, I can quite happily get 2-3 years out of my handset because I take a very long time and choose carefully what I'm going to buy. To be honest though I think my days of buying from a network are gone as the last few times I have been suckered in to an 'upgrade' it's worked out so much more expensive over the lifetime of the contract. From now on I'll only ever be buying a SIM only service from whichever network suits my budget and requirements at the time, and an unlocked handset - new or secondhand I'm open to both options. It gives you so much more freedom to get exactly the phone YOU want without being pestered in to buying whatever's on special promo that month!
Not pointing at any particular phone retailer but many of them had a terrible reputation for using technicalities to avoid paying the "cashback when you send us your fourth monthly bill" style of rebates which were popular a few years back. Alleged victims spread the news and I believe that permanently and severely depressed a lot of their repeat business.
Very sad for the staff, but I can't say I'm sorry to see a VC get shafted before doing the shafting - they paid themselves a one-off £200M dividend not so long ago after a bond issue.
Seems a bit unfair solely to blame EE and VF - they were just the last to see the light and are no more responsible than the other operators.
but I'm less a fan of reduced consumer choice.
It was always clear that the networks resented their existence - the man in the Three shop advised me not to go to Phones4U, as they "wouldn't have tested all of their handsets on our network". Granted, the chap at Phones4U couldn't get me a deal that suited, but he was a lot less pushy than any sales drone from the network-owned shops, and didn't try to blind me with bullshit.
It seems to me that phones have reached the same point that Windows XP did a while ago - most peoples phone handsets do all they need to do, and are reliable enough to keep going for a few years yet. Those people decide that a sim only contract is all they need if they keep their current phone, and the contracts for them are not so complicated and are easily compared. Why bother paying a middle-man with lots of expensive shops when the carriers can take orders on a website and deliver a sim in an envelope?
I'm not on-board with your XP comment, but I do agree that we have in many ways reached a point where increasing numbers of people that would upgrade phones constantly no longer feel the need to do so.
I'm in that category. Next month I'll have kept a phone for 2 years. I can't recall when that last happened. The same goes for my other 2 mobiles - I see zero reason to change any of them... at all.
There must be more to this story.
If the EE contract wasn't up until 2015 why go into administration now, surely they have 12 months to find an alternative provider or have they simply decided the game is up?
If EE pulled the contract are they not in breach of contract of some nature and what is to stop them from doing this to any other independent business across the UK? If I was an indie and in partnership with EE I'll be risk assessing my business and telling EE where to stick their partnership. Unless of course there is more going on behind the Phones4U scenes that we've been told.
I'm not surprised by EE and Vodafone's actions, corporate greed and shafting the middlemen in nothing new, and I like many others here question the validity of such a model, but saying that you can apply the same logic to many other independent market sections and question are they needed:
Dare I say IT resellers
These people have been replaced by websites, and I question their "independence" anyway, as 9/10 the recommendations wasn't necessarily what is the best deal for the client, but also how much commission in nets them.
As a general rule I'd never go near any company that replaces words in its name with numbers or letters, not due to any kind of grammar fascism but because it has always a sign of some kind of shonky business. Spammers pissed in that pool many years ago, nearly all the spamvertised domains at one time used a similar naming methodology.
The trend with most of the companies that have gone under is that they refused to adapt. HMV / Virgin fought downloads and tried to prevent people moving away from physical media. Phones 4U tried to maintain the age old 're-seller' model which is effectively to be a middle man. They chose not to create an app market or a media rental service or to expand their offering in line with the expansion of the capabilities of the technology. The networks are getting more advanced (4g, more wifi coverage, ability to pay etc), the devices are getting more advanced. All these advancements create immense capability which should be embraced by retailers* not held back, fight it and you will lose.
*Phones 4u, despite what their management team said many, many times, are not a retailer. They are at best a broker. You go to tesco and buy a loaf of bread they give you bread you give them money. That's retail. If you went in and they gave you a loaf, £500 and a ps4 to persuade you to sign a contract where you would pay Warburtons £50 a month for 24 months then that would be a closer match to Phones 4u's model... which is not retail.
Actually, I disagree with your analysis.
P4U and other sellers of mobile phones (with airtime) contracts don't work like that - the clue was in that you never got a network branded (and locked) handset from them. That suggests there was some sort of way they were providing the handset, effectively selling it to the network at whatever cost (the exact details obviously remain opaque to consumers) which the end user then paid the network for over the period of the contract.
It has to work something like that otherwise:
a) I wouldn't have got my 500 quid smart phone for "nothing"
b) I wouldn't have got a differently priced deal to what EE were offering directly
They quite obviously were not just skimming money for a "sign up", although even if they were, retail is all about the middlemen and the competition it creates.
You are advocating only direct sales of products - which is not good for the consumer in the slightest.
BTW I haven't read anything today about CarphoneWhorehouse being in a similar position... are they next or have they taken it up the behind in terms of the networks bashing them on their margins? (which the other report on El Reg suggests actually was the root cause here)
'Phones 4u is seeking to appoint PwC as administrators at the firm, which has a turnover of £1bn and "significant cash in the bank". Its stores will be closed while administrators, who are to be appointed by Phones 4u's private equity owner BC Partners, attempt to mount a rescue plan for the business.
“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," said Phones 4u boss David Kassler. "A good company making profits of over £100m, employing thousands of decent people has been forced into administration."
Kind smacks to me of throwing in the towel a trifle early...but that is all to easy these days..If it has no contracts then a new leaner business will have no contracts either...or maybe I'm a mug... ;-)
I daresay there's some key point I'm overlooking, but it strikes me that Phones4U could take this as an opportunity to try to get into bed with the MVNOs like Virgin, Tesco Mobile, Giffgaff, etc. and provide a one-stop shop where people can compare the various MVNO contracts and buy unlocked handsets. I know that the general public is still betwitched by the chimaera of the "free" phone, but maybe Phones4U could either team up with the MVNOs to offer subsidised handsets, or develop their own payment-by-instalments system.
It would also be advantageous for the companies concerned, given that your average punter knows next to nothing about Giffgaff or Tesco Mobile and would probably steer clear of them purely on the basis that they're an unknown quantity. If a well-known high street chain started promoting their tariffs and contracts, and (most importantly) explained to people that they actually use the same infrastructure as one of the Big Four, I'm sure a lot of people would be persuaded to give them a whirl, especially if they signed up to a rolling monthly contract where they can get out if they're not happy.
Couple of years ago I went to them for new unlocked handset and renew my contract. Pretty ok sales guy, no real complaints there. BUT:
Day before visit: never had spam on this number in ~12yrs.
Day after: FIVE spam texts, only weeks later dying down to one every couple of days.
So, yeah. Nobs.
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