Mobile giants put squeeze on middlemen

MOBILE phone giants are turning their backs on the High Street retailers that fuelled the sales boom of the Nineties.

Vodafone, T-Mobile, mmO2 and Orange are all cutting back the special deals they offered to phone shops for pushing their products.

Chains such as The Link, Phones4U and Carphone Warehouse have been receiving big commissions on each phone sold, and in some cases a share of airtime revenue. But with market growth slowing, operators are determined to end these deals.

Vodafone has restricted the supply of third-generation video phones, holding back some models and tariffs to supply its own network of more than 200 stores.

Orange, with more than 250 outlets, is ready to follow suit as it launches its own 3G service, the new generation of phones that offer video and music downloads.

And T-Mobile sold more than half of its phones direct to customers for the first time last month, according to a company spokesman.

Vodafone chief executive Arun Sarin told Financial Mail that the changes were being brought in only partly because of the cost of selling through independent retailers.

He said: 'Our own shops produce better customers. They are more loyal and they spend more. Increasingly, we want to train customers to use the new services because trained customers produce more revenue.'

Brian McBride, chief executive of T-Mobile UK, said he was expanding his network of shops from 120 outlets to 200 by the end of next year.

'It is customer quality that counts,' he said. 'There are plenty of good distributors about, but we do not see our future stuffing tenners into the tills of those that are not so good.' A spokesman for mmO2 said that after cutting its shops base, it was now increasing the number of outlets again in a drive to sell more phones direct to the public.

But though the mobile phone companies are adding more stores, they are still overshadowed by retail chains. Market leader Carphone Warehouse has 500 stores, Phones4U about 350 and The Link about 292. There are many smaller chains and independent stores.

Elsewhere in the sector, phone maker NEC has appointed law firm Clifford Chance to pursue corrupt phone distributors. They 'unblock' cheap pre-pay 3G phones so that they can be used on any network and be sold overseas.

An industry source said: 'To attract long-term customers, phone network Three sells phones for £30, though they could retail in the High Street for more than £200. There is a big opportunity there for rogues.'