In Depth

Phones 4u collapse: jobs saved after EE agrees to buy shops

EE, blamed by Phones 4u for precipitating its downfall, to save the day – with Vodafone

Hundreds more jobs at stricken mobile phone retailer Phones 4u could be saved because network operator EE has agreed to buy approximately 60 of its shops, in addition to 140 branches which Vodafone has arranged to take over.

EE's intervention – which has yet to be fully confirmed – should save between 300 and 400 jobs, while Vodafone's involvement will safeguard 887. Electronics retailer Dixon has offered around 800 jobs to the workers who manned Phones 4u departments in branches of Dixons.

In total, around 2,000 jobs at Phones 4u should now be saved. However, two thirds of the 1,028 people employed in the firm's Newcastle-under-Lyme head office have already been made redundant, says The Guardian.

The company had a total of 5,596 staff and 560 shops, so despite the recent news, thousand still face unemployment. Talks are continuing with other potential buyers, however, including international brands keen to enter the UK market.

Ironically, Phones 4u's saviours are the very firms its management have blamed for the collapse. Founder John Caudwell has even gone so far as to suggest the mobile phone providers acted in concert to withdraw their custom from Phones 4u in order to put it out of business.

Last week, Phones 4u's current owner – BC Partners – accused Vodafone of acting in a way "designed to inflict the maximum damage" and said EE's decision to stop selling contracts through Phones 4u was "surprising".

Phones 4u sold handsets and contracts provided by other companies. Its advisers were said to be impartial experts able to help customers get the best deal and phone to suit their needs.

Phones 4u administration: what does the closure mean 4u?

Vodafone and EE have expressed interest in acquiring part of Phones 4u after administrators set a deadline yesterday of 48 hours for the company to strike a deal with the mobile phone networks or face liquidation.

The shock news that the company was going into administration after EE announced that it was withdrawing its business on Friday came as a surprise to customers and even many of the company's employees. But news of Vodafone and EE's interest gives some hope to the 5,596 staff who's jobs are currently at risk.

Why did Phones 4u go into administration?

Phones 4u made a clear profit of £105m last year and was known across the UK for its up-tempo television and radio advertisements. But when mobile operator Vodafone announced that it would stop selling contracts through Phones 4u towards the end of August the company's business model began to look under threat. Similar decisions had been made by O2 and Three earlier in the year.  EE's withdrawal was therefore the final blow to Phones 4u's business model, which depended on selling phone contracts on behalf of the major mobile operators.

What happens next?

Administrators PricewaterhouseCoopers (PwC) have given the company 48 hours to strike a deal with one of the major phone networks. If any of them agree to renew their deal, the company may be able to resume trading. If not, the administrators will contact potential buyers before deciding whether to shutter Phones 4u's 720 outlets, including 550 stores. PwC said: "These conversations will determine whether we can re-open stores and trade, and also if and when we can pay the arrears of wages to employees."

What will happen to the staff?

Employees have been told not to turn up for work this week, but Phones 4u said staff "will continue to be paid until further notice". Still, it is not clear how many jobs can be saved. According to The Guardian, "the prospects look bleak".

Will Phones 4u's closure affect contracts bought through the company?

All existing mobile phone contracts will be honoured, Phones 4u says. Customers can continue to pay for their contracts as usual with no interruptions to their service. Once their contracts expire, customers will have to choose a new company for their mobile phone contract. 

What will happen to phones that have been ordered from Phones 4u?

Phones 4u says that any phones that have been ordered and already sent out can be used as normal. But orders that have not yet been sent will be cancelled with refunds offered to customers, the BBC says.

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