Dixons Carphone’s turnaround efforts have suffered a setback after it failed to reach a new agreement with O2.
The two companies had been engaged in negotiations over an extension for the past year but failed to reach a mutually desirable outcome. O2 products and services will no longer be available in Carphone Warehouse stores or on its online platforms with immediate effect.
Dixons Carphone CEO Alex Baldock has made the renegotiation of operator deals a pillar of his transformation programme. Shortly after he was appointed in 2018, he declared the existing relationships with EE, O2 and Vodafone as “unsustainable.”
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O2 Carphone Warehouse
It is understood the retailer wanted to make significant changes to its partnership with O2 but the operator was happy to maintain the conditions of the existing arrangement.
The door has been left open for a potential renewal in the future but until then, O2 is confident that investments in its own retail channels and partnerships with other independent retailers leave it in a good position.
“After 20 years of trading, our current consumer contract with Dixon Carphone expired on 31st March 2020,” an O2 spokesperson told TechRadar Pro.
“While we’ve worked hard over the past year to put a number of options on the table, it has not been possible to reach a new agreement as they’ve made clear to the market that they wish to take a new strategic direction and change the relationship they had with mobile operators.”
Dixons Carphone is the UK’s latest mobile phone retailer but has struggled to cope with changing consumer habits. A saturated market and longer refresh cycles are lowering contract renewal rates, making SIM-only tariffs and SIM-free handsets more popular, squeezing margins.
As well as “resetting” the company’s relationships with operators, the company is improving its technological capabilities, training staff, and plans to offer credit services in a bid to revitalise its mobile business and drive online sales. To this end it is closing all 531 standalone Carphone Warehouse stores in the UK on April 3.
Dixons Carphone is shrugging off the impact the failure of negotiations with O2, confident the market is moving away from lengthy contracts that tie airtime to specific devices. It plans to launch a new offering later this year and hopes that O2 will return to participate on more agreeable terms.
“As part of our strategy we are moving to a new, more flexible and transparent mobile offer that gives better value and choice to our customers,” said a Dixons Carphone spokesperson.
“This offer is set to launch later this year. While our contract with O2 to sell post-pay has ended, we continue to offer our customers a wide range of choice through our own Mobile Virtual Network Operator, iD Mobile, and partners EE, Vodafone, Virgin Media and Voxi, including those who currently have an O2 connection.”
Dixons Carphone hopes to break even by 2022, but industry observers have described O2’s withdrawal as significant.
“The loss of one of its biggest customers is a huge blow to Carphone Warehouse and now raises questions over the retailer’s relationship with its other partners, including EE, Vodafone and Virgin Media,” said Kester Mann, an analyst with CCS Insight.
“The news comes just days after the embattled retailer announced that it is closing all 531 standalone stores, a decision that cannot have helped the negotiations with O2.”
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