Vodafone 'Plotted Joint Takeover Of Phones 4u'

By Mark Kleinman, City Editor

Vodafone was in talks about a joint takeover of Phones 4u as recently as two months ago but abandoned the proposed deal without explanation.

Sky News has learnt that Vodafone executives discussed at a meeting in June with financial and legal advisers to Phones 4u a takeover of the chain by the mobile phone network along with EE, its rival.

The deal would have been structured as a 50:50 acquisition of Phones 4u, with Vodafone encouraging the retailer's legal team to "review how this could be achieved given the competition constraints", according to a person close to the talks.

A subsequent discussion between Vodafone and Phones 4u indicated that Vodafone might pursue a takeover on its own if EE did not wish to participate, the person added.

On July 8, while parallel discussions were taking place about extending Vodafone's distribution contract with Phones 4u, the mobile network's UK executives made a presentation to group colleagues entitled "Phones 4u - Partner of Choice".

Several weeks later, Vodafone notified Phones 4u that it would not be renewing their agreement, while no further talks about a takeover of the company were held.

The revelations shed new light on the final months of Phones 4u's existence as a standalone company, with its future now under threat following decisions by Vodafone and EE to terminate distribution agreements next year.

A Vodafone spokesman acknowledged that the takeover discussions had taken place but said: "For regulatory and commercial reasons the acquisition of Phones 4u was not an option.

"The UK management team took legal advice in the early summer to review its potential but it was quickly dismissed given the advice we received. 

"We have made our position on the commercial negotiations with Phones 4u very clear and have nothing more to add.

"The decision to terminate our contract with them was made independently by the UK management team on purely commercial reasons following extensive negotiations."

The news puts in jeopardy as many as 5,500 jobs at Phones 4u, although as Sky News revealed earlier on Monday, its larger rival Dixons Carphone is drawing up plans that could see many hundreds of those staff retain their roles or fill other vacancies at the UK's biggest mobile phone retailer.

Dixons Carphone has tweeted support for Phones 4u workers

Phones 4u's crisis sparked an unusually hostile bout of corporate mud-slinging, with John Caudwell, the retailer's founder, accusing Vodafone of being a "ruthless partner".

Currys and PC World shops currently employ just over 800 Phones 4u staff, with Dixons Carphone keen to offer all of them jobs at the rebranded Carphone Warehouse concessions.

The timing of a more detailed statement by Dixons Carphone will depend upon the progress of discussions between it and PricewaterhouseCoopers, which was designated by Phones 4u directors as the company's administrator on Sunday.

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