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The mobile phone market is in the top ten most concentrated industries in the UK (joining banking, accountancy, retailing and oil). Since the merger of Orange and T-Mobile to form EE, Britain’s mobile market has shrunk to three major suppliers, Vodafone, O2 and EE, effectively creating an oligopoly.

What has not been revealed until now is that Vodafone’s chief executive, Vittorio Colao, held talks with the owners of Phones 4u as late as July 9 this year. In those talks Vodafone is said to have offered to buy the struggling Phones 4u in whole or in part, so as to win additional direct distribution. It indicated it was willing to sign a new long-term supply agreement that had already been negotiated.

So it came as a huge shock to Phones 4u in August to learn that Vodafone had decided to withdraw from a 15-year contractual arrangement with no notice or warning. In the words of one of those present at the July talks, it essentially decided: ‘Why buy the stores they wanted for a pound, when they could buy them for a penny?’

The reputation of private equity and the debt it places on the balance sheets of target companies is hard to defend. As troubling, is that two main suppliers – Vodafone and EE – have respectively bought 140 and 58 of the best stores for a song. Caudwell, who sold Phones 4u in 2006, was the first to suggest that the suppliers had behaved in a ‘predatory’ fashion. Having sold the company into private equity he may have forfeited the right to have a say.

They have chosen to exercise this power by cutting out the middleman, Phones 4u (Dixons Carphone is just hanging on), and to adopt a direct-sales model. In the past, the Office for Fair Trading might have conducted a preliminary inquiry into these events. So far we have heard nothing from its successor organisation, the Competition and Markets Authority. In the absence of such a move, Select Committee hearings or even an old-style Department of Trade inquiry should be the right response. Consumers, employees and bond-holders have been treated disgracefully and need to know what really happened.

Read more: http://www.thisismoney.co.uk/money/comment/article-2768644/ALEX-BRUMMER-Case-probe-Phones-4u.html#ixzz3mMtpSACC
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