Chris Blackhurst: Phones 4U is a parable of our times - sold high and then sweated to death

Private equity owners only knew to cut costs, hire cheaper staff and drive hard bargains

Click to follow
The Independent Online

Two stories dominated the start of the week. One, the forthcoming vote in Scotland, was predictable, the other wasn’t.

Actually, I tell a lie: they were both predictable. First reactions are usually the best, and as soon as I heard that Phones4u had gone into administration, I was not surprised.

I confess my view was based more on what I saw in the high street than hard numbers. The shopfronts were tatty and the staff were often on the pavement, accosting passers-by and persuading them to enter. Compared with Carphone, where the assistants appeared smarter and more knowledgeable, it lacked class.

Then it sank in that despite my snobbishness, Phones 4u was running up profits of £100m a year. It had fallen because its only two suppliers of mobile networks had pulled out.

But the more I looked at Phones 4U, the more its demise felt like a tale for our times. Nobody involved in its recent history emerged with their reputation enhanced.

The founder, John Caudwell, was busy blaming Vodafone and EE for pushing it under but, arguably, the rot set in when he cashed out, selling the chain to private equity in 2006 for £1.46bn.

That was at the top of the market, and in order to try to recoup their money, the private equity owners had to make Phones 4u sweat. They did, but in the only way private equity appears to know: cutting costs, hiring cheaper staff, driving hard bargains. Those deals were too tough for the mobile firms. They were looking at cutting out the middleman anyway, and Phones 4u’s lack of flexibility stiffened their resolve. So, out of Phones 4u they came, and down the company went.

Nothing new in selling direct

Much of the howling was directed at the network giants. But was their decision to remove their wares, and to sell direct, any different from what has occurred elsewhere – with travel agents, for example?

The elephant in the dining room

Wednesday was the British Retail Consortium annual dinner at the Grosvenor House Hotel in London’s Park Lane. It was black-tie, mainly male, and white. That, of course, could be said about most of the professional and industry trade body events taking place in the top London hotels on any midweek night.

On the way there with a female colleague, we speculated as to how much these bashes cost, and whether there isn’t a better alternative. Do people in these health-conscious days really care about the food? What about standing around with drinks and canapés, chatting and networking, but keeping quiet when speakers take to the microphone? It has to be cheaper and just as effective.

Then, we agreed, that’s difficult for a national organisation. The guests have travelled far and wide. They don’t want to stand for a couple of hours but to sit and relax. 

Even so, they are ritualistic affairs. The BRC dinner, for instance, was attended by over 1,000. How on earth can you cater for that lot and make it special?

The keynote speaker at the BRC was Sir Charlie Mayfield, head of John Lewis, and there was a comedian, Fred MacAulay. Sir Charlie made a strong speech, warning the Government about the importance of retail and calling for a much-needed overhaul of business rates – a form of taxation that can be traced back to the Elizabethan era.

He did not dwell too much on the impending Scottish referendum, though he mentioned the chaos that might result with a Yes. 

MacAulay is a Scot, but he barely touched the vote either. Instead, he talked about his time as a retail accountant. It was as if Scotland was too monumental to be touched. There was an underlying tension in the air. We could have been entering unknown territory, where everything would never be the same again.

Has golf really crossed the line?

Before the Scottish ballot there was another vote in Scotland. The Royal & Ancient golfers at St Andrews decided to admit women members.

I was reminded of the golf club I once joined in suburban Surrey, where only after I’d signed and paid my subscription did I notice a line painted across the floor of the main bar. I queried what it was for and was told that women could not cross it.

This was a club where companies, which would like to think of themselves as enlightened, regularly held golf days. Only if I revisit that bar and find the line has vanished will I believe golf is finally catching up with the rest of society.

Were they worried? Only very

Friday, and the fears of business proved unfounded. The pound started rallying overnight in Asia even before the first official results  in Scottish were announced and  continued on its sweet way  through the morning.

The relief in the City was palpable. Smiles had returned, the atmosphere was more carefree. They really had been an anxious few days.