John Caudwell: The millionaire who finally found his calling in mobile phones

By Darius Sanai
Click to follow
The Independent Online

It is 6am, and John Caudwell is on his racing bicycle, speeding along the Staffordshire byways. Every morning, he clocks up 40 miles, returns to his rural manor house, then drives to his office in Stoke-on-Trent. That would be enough daily exercise for most middle-aged men, but by 8pm, after a full day's work, Mr Caudwell is back on his bike for two more hours of lane-bashing. "Sometimes," he says, "when I look out of the window in winter and it's dark and two degrees above freezing and sleeting, I hesitate. But I always do it."

It is 6am, and John Caudwell is on his racing bicycle, speeding along the Staffordshire byways. Every morning, he clocks up 40 miles, returns to his rural manor house, then drives to his office in Stoke-on-Trent. That would be enough daily exercise for most middle-aged men, but by 8pm, after a full day's work, Mr Caudwell is back on his bike for two more hours of lane-bashing. "Sometimes," he says, "when I look out of the window in winter and it's dark and two degrees above freezing and sleeting, I hesitate. But I always do it."

As well as being a cycling fanatic (he took up the sport only six years ago and covers more than 20,000 miles a year), Mr Caudwell, 47, is one of the most successful entrepreneurs in Britain.

The privately-held Caudwell Group, in which he has a majority stake, owns a mobile phone empire including the country's biggest mobile phone distribution network, repair service, accessories distributor and independent airtime provider. The group also includes the Phones 4U chain of retail outlets. All are run as separate companies with distinct management structures. Mr Caudwell has built his businesses up from scratch and, with his brother Brian, a minority investor, is estimated to be worth £300m, placing the duo 85th on The Sunday Times Rich List.

Just 13 years ago, John Caudwell was a used-car dealer, working out of small premises in the decayed industrial landscape of Stoke-on-Trent. He sold around 15 cars a week. Now, through the companies his group owns, he has the biggest UK independent mobile telephony business by some way. The group's 1999 turnover was £596m, up from £160m in 1996. And John Caudwell has plans. "We expect to double our turnover in the next two years," he says. His pre-tax profits last year in this low margin business came in at £14.3m.

The Caudwell companies - 20:20, Dextra, 4U, MPRC, Singlepoint, Phones 4U, E.Commercell, 4U Net and Calls 4U - are expanding rapidly within Britain and most of them are setting up overseas as well. 20:20 Logistics is already Europe's largest handset distributor, with operations in the UK, the Republic of Ireland, Germany, Belgium, Spain, Denmark and Norway. The Mobile Phone Repair Company (MPRC) is in four countries, and Dextra, the accessories company, is following suit.

"Wherever there's a business opportunity that marries into what we're doing we'll do it wholeheartedly," says Mr Caudwell. "We want to be number one in anything we do." On 15 March, he launched 4U Net, a separate company which was Britain's first totally free internet service. Although Alta Vista's much-trumpeted announcement that it was doing the same came a few days before, Mr Caudwell's company had run trials last year, and launched its service when the American company was still planning its free launch.

"They saw what we were doing and came and stole our thunder," says Mr Caudwell, smiling. "But there's a wrinkle or two with their service, which we don't have. Now we've got 30,000 customers on 4U net."

John Caudwell is a striking man, as fit as you'd expect for someone who cycles up to 100 miles a day, every day, in all weathers. He is also a speed freak. He owns three of the fastest road-legal motorbikes ever made. His favourite Honda VTR1000SP-1 accelerates from zero to 60mph in two seconds and has a top speed of more than 170mph. And there's the helicopter.

He's also a curious mix of modesty and obvious wealth. He owns a white £200,000 Bentley, but most days he drives a Toyota sports car. He bounds down the stairs to the reception area of his HQ building to meet me himself, and chats amiably with employees who seem undaunted by him. Mr Caudwell is married, with three children aged 20, 12 and five, and he is the local co-ordinator for the NSPCC and the founder of a children's charity. The smooth charm of some self-made men is not evident, but there is a determined passion about the things that fire him up.

He hit the headlines in April when he launched an internet campaign to save Rover after BMW said it was selling. He sold all Caudwell Group BMW company cars and urged other businesses to do the same. "It was a scandal the way they treated Rover," he says. The campaign had only modest success and fizzled out with the Rover sale this month.

His office is a smallish room carpeted with Wilton (white diamonds on a claret background) and lined by posh striped magnolia wallpaper. The single window has a view over a car park and wasteland near a busy roundabout.

"Last weekend was pretty tiring," he says. He and some friends cycled from Stoke, down the length of Wales, to Oxford and back to Stoke, a distance of 440 miles along winding hill roads in three days. This would be a tiring journey by car, I say. "Yes, that'd be right," he replies with a smile. Earlier this month, he raised raised £150,000 for children's charities by cycling from John O'Groats to Land's End in nine days.

One quickly gets the impression that Mr Caudwell is utterly, unstoppably determined in everything he sets out to do. Yet his initial masterplan for life took a long time to start working. From 10, Mr Caudwell says he had one aim.

"Before I really even understood what the term meant, I wanted to be wealthy," he says. "I wanted to be able to drive the beautiful old Rolls-Royces my father admired when I was a child." His family was brought up in poverty in a terraced house in Stoke. "As the years passed and I was nine, 10, 11 years old it became obvious I was going to start up a business of some sort," he says. His first success came when he was 10, when he started selling soap products for the blind, door to door.

"We'd go around knocking on people's doors saying we were selling soap products for the blind. Every time I went back to the minibus I had sold my entire allocation, for £5, and I got £1 commission. That was quite a lot to a 10-year-old those days. I saw all the adults would come back to the minibus and nobody would have sold anything."

So how did he succeed where the others failed? "I would knock on those doors until I'd been to every door in the neighbourhood. When people said, 'Go away', I'd be thinking, what can I say to the next one? I told them: 'I've got some really good products here, I'm selling them for charity, it's for the blind, but forget that because they're made from sandalwood, really good products at a really good price'."

His voice rises enthusiastically with the memory. "They'd say, 'Ooh yeah, that's gorgeous, how much is that?'" The experience was fundamental. "That taught me a lot. It was a matter of lateral thinking and analysing the situation, and that's what business is about - it's about analysing the things that you do and next time doing it better, faster and more profitably."

After initial promise in the entrepreneur's club, the young Caudwell became somewhat bogged down. He readily admits he was desperate to find a business idea that would make him rich, but without a commercial family background, in a depressed area where the traditional pottery firms were closing, it was hard for the teenage prodigy to find a viable proposition.

He left school at 16, three months into A-levels in maths, physics and chemistry. "I just wasn't academic. I wanted to be in the real world." His first jobs were, variously, sweeping a pottery floor, manhandling steel ingots in a mill, and working as a nightclub bouncer. The next year he was taken on by the Michelin Tyre Company as an apprentice engineer, and he stayed 10 years, until 1980, though that didn't stop the hyperactive Mr Caudwell from setting up three businesses on the side. The first was mail-order, selling motorcyle clothing from home. "That business taught me about the ruthless manipulation of large corporates," he says. "The suppliers really screwed my business. They were unscrupulous, they dishonoured the commitment they'd given me when it no longer suited their business." He never made a profit. The second was a grocery shop, run by him and his wife, which rapidly taught him returns didn't necessarily increase with the amount of work you put in.

"Some of the things I did in my early career were massive learning curves," he says, "because I had no-one to guide me. You learn very quickly because it costs you torment and trouble." Mr Caudwell's next business would provide the path to his later success. He started going to car auctions after working his nightshift at Michelin, buying cheap used cars, tidying them up and selling them on.

In 1980 he quit his Michelin job, sold the motorcycle and grocery businesses, paid off their debts and went full-time into car trading. It was not an obvious route to wealth, and seven years later Midland Garages, as his dealership was called, had a staff of seven and did a fair, though not particularly lucrative turnover.

Then, one day in 1987, Mr Caudwell, then 34, went to an electronics shop to buy a mobile phone for his business. "They were still as big as bricks, and very much a specialist, marginal tool," he says. The retailer was selling phones for £1,600 each, and two for £1,350. "That got me thinking, if there's so much discount for two, how much could there be for buying them wholesale," he says. That afternoon he rang Motorola for an answer, and they told him he would either have to buy from a dealer, or become a dealer. He asked to be accredited as a dealer straightaway.

"I bought 26 phones which took eight months to sell," he says, ruefully. (His companies now sell more than that every minute.) "It was a bit of a slow start. Nobody knew about mobiles then, there was hardly any demand, and anyway nobody would come to a car salesman to buy a phone." So could he see that the future for mobile telephony was so bright?

He shakes his head. "My first thoughts were that there were big margins in this business, but very low volumes, and the volumes would go up and the margins would come down. But at that early stage I could never have anticipated the boom today."

Mr Caudwell hired a manager to run the mobile business out of a backroom in the car dealership, and a year later it was still running at a loss of around £1,000 a month. "All of a sudden, the phone manager left and the key car salesmen found other jobs, so I had to restructure the business," he says. "For the first time I based myself in the mobile phone business, which I hadn't been concentrating on before, and within a month I turned the £1,000 a month loss into a £2,000 a month profit."

This was really the crucial moment, in 1988, when Mr Caudwell finally found his calling.

"I spotted the opportunity that as a small dealer I could buy all the stock I wanted from Motorola, but it was at a high price," he says. "I got a retrospective rebate from Motorola if I bought a lot of product. But I couldn't buy that much product because I couldn't sell enough.

"The big service providers, on the other hand, couldn't get enough stock, because Motorola were supplying people like us because we paid them more for the phones.

"So I managed to talk some big retailers into buying the product from me, on the basis that most of the profit in those days was in selling the airtime, not how much you managed to buy the phone for. I told them if they hadn't got the phones they were losing market share. So it was better to buy from me at an increased price than to not have them at all and not have any sales.

"And they went for it," he says, with some relish. "I did them the best deal I possibly could, and I just went for my retrospective rebate.

"After that I pulled off one deal after another. I bought the cheapest Amstrad computer there was, had a girl sitting next to me loading the names of all the phone dealers in the country and started prospecting them on the phone and started selling them wholesale phones."

He also started a mobile phone repair centre on his premises, with the manufacturers' blessing. In a few years this would grow into MPRC, the UK's biggest such enterprise.

In the early Nineties, he developed his strategy of wanting to be in "every single aspect of mobile telephones that it was possible to get into". That way, he says: "I'd find out which was the best way to end up making money. So I ended up servicing phones, repairing phones, wholesaling phones without airtime and wholesaling them with airtime as brokers for airtime companies.

"I opened a shop so we could retail them, did accessories, and basically, every opportunity within the mobile phone business we took."

As the businesses grew, Mr Caudwell made them increasingly autonomous. Today they operate as entirely separate enterprises with no horizontal links or mutually favourable agreements.

Mr Caudwell, an outspoken Thatcherite, is passionate about that, saying cross-subsidising firms is as bad for a corporation as state-subsidised industry is for a national economy. "Now," he says, "if 20:20 (his national distributor) wants to sell to one of the national chains and Phones 4U (his retail chain) wants the product, the decision-making process is purely and simply as to who is the best customer and who's got the contract in place. There's no ownership issue. I believe in sink or swim, and if one of my companies can't survive on its own, then another company shouldn't prop it up, especially at the expense of my own customers."

He says relationships between his companies are often worse than external relations with, ostensibly, rival companies, which he says is "very healthy", adding: "A protected practice of any sort can't win. It's just an instinct, I know that's the way to do it." Total staff numbers have now reached 1,800.

"I'm probably lucky, because I inherently know how business should be. A protected practice of any sort can't win. It's just an instinct, I know that's the way to do it."

One of the reasons for Mr Caudwell's relative obscurity in the millionaires' club may be that Phones 4U, the group's most public face, is a relatively small retailer, with around 130 shops.

He says he became convinced of the profit-making potential of the retail side only recently, though in typical fashion he is expanding the business rapidly, with a further 70 shops to open this year. City sources say the group has been negotiating with one of the major high street phone retail chains about a possible takeover that would establish Phones 4U as one of the two largest phone retailers in the country.

The two ventures that most excite Mr Caudwell now are 4U Net, the free internet service, and E.Commercell, a radical system his technicians have developed to allow recharging of airtime on prepaid mobiles by using a swipe card. He is rolling this out across Europe this year and he is convinced it will become the premier system of its kind worldwide, helping to double the group's turnover within two years.

Mr Caudwell says 4U Net is now a vital part of his plans, though it makes no money for the group. "With a saturated market it's all about value and customer loyalty, and this way I'll gain loyalty for the other businesses. Eventually, I'll find ways of making money as well, through value-added propositions on the website."

In an increasingly saturated market, customer loyalty, he says, "is absolutely essential, critical", adding: "We need to give them such good value that they don't really want to go anywhere else. So we've got to give them fixed wire propositions, mobile phone propositions, pay-TV propositions, internet propositions, so they get a complete package from us for all they need, and we'll send them one bill, which makes them happier and cuts our administration costs.

"The secret is to cut the margins down, add value the customer can really see, run it in a very efficient way and let the customer loyalty be the most important thing of all. I'm confident we will be one of the biggest mobile telecommunications companies in the world."

Comments