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Phones 4u slips into administration after EE cuts ties with Brit mobe retailer


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.

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