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Thursday, February 22, 2007

More UK Distribution Disruption

Yesterdays breaking news from the ever excellent Mobile Today that o2 have decided to drop Phones 4U is a huge move which vindicates the Voda UK strategy and one that continues to indicate that the network operators are doing everything in their power in reduce subsidies.

The next step is obviously in the court of T-Mobile and Orange, but further pressure on both Carphone Warehouse and Phones4U is to be expected. As far as I am concerned if no retail chain can offer every single network, it is more likely that people will shop around and therefore increase the probability of people buying phones from the network’s own shops. I am expecting to see a lot more network operators offering “specials” only through their own stores and therefore driving even more traffic to their shops. In fact, H3G UK is already following this strategy with their X-Series only available through their own stores. The handset manufacturers themselves are admitting that the operators are becoming a lot more professional in retail.

The 800lb gorilla of UK Retailing, Tesco, has also just revealed plans for opening 100 Tesco Telecom stores up and down the country. This definitely shows that there is still a lot of value in the telecom retailing and a sign that Tesco is not going to roll over and let Carphone dominate the prepay market. This is an extremely worrying sign for Carphone as prepay has been the main source of volume growth over the last couple of years. Carphone now seem to be in the middle of a giant pincer movement: with the operators wanting to reduce commissions and reduce sales in contract through retailers; and Tesco wanting a larger slice of the prepay market.

It reminds of a great quote from John Malone about Al Gore - "You can't win in a pissing contest with a skunk".

Carphone needs a new strategy fast.