Shops4U

Cauldwell Holdings, owner of Phones4U is being sold by its founder John Cauldwell in order so that he can send time sailing around the world in a giant yacht. Fair play.Cauldwell denies that the sale is due to increased competition in the marketplace. See Fortune4U as Cauldwell puts phone empire up for sale by Damian Reece, The Independent (November, 10 2005) registration/subscription required.

Mobile phone shops were originally formed because Vodafone and BT Cellnet (02) had to have intermedaries called airtime providers in between them and the customers. This was designed by the regulators as an artificial mechanism in order to try and spur competition in the sector and provide better value for the customer. However, now all the carriers have their own airtime reseller operations or direct client billing relationships and an online and offline retail presence. So carriers have less incentive to offer signing on fees to get new customers.

Although the group enjoyed 30 per cent growth last year is Cauldwell getting out as the industry turns from growth to value?

The UK has over 80 per cent mobile penetration and many people I know now have two handsets and accounts. Growth will come from upgrades, which is something carriers are getting stingy about. I had to get my latest handset SIM free as Orange claimed that they were constantly out of stock. Orange’s competitors such as Vodafone are looking to lengthen the upgrade paths with 18-month contracts up from 12-months, probably with a view to having a similar upgrade time of two years like its sister carrier Verizon.

This means that phone shops will have less carrier subsidies, which makes up the bulk of their money. And since I was buying my handset SIM-free I sourced it from a supplier that does not sell mobile phone contracts in order to get the cheapest handset price. Thus, the shops have increased competition from the IT sales sector on handsets sales.

Carphone Warehouse has tried to expand into the notoriously difficult voice market with its TalkTalk service. All of this empirical evidence tends to suggest that Phones4U is now a value play rather than being able to enjoy the same kind of stellar growth into the future.