British telecoms giants accused of plotting to destroy Phones4U

Top executives at some of Britain’s biggest mobile phone networks brazenly plotted to destroy the high street chain Phones4U and boost their own profit margins, a court heard.

Bosses at EE, Vodafone and O2 had “nakedly anti-competitive” conversations with each other as they schemed to remove Phones4U from the market, London’s High Court was told.

French mobile company Orange and Germany’s Deutsche Telekom, which co-owned EE at the time, are also said to have been involved in the plot, along with bosses at Telefonica, O2’s Spanish owner.

Kenneth MacLean QC, representing Phones4U, said the British chain was profitable before its collapse in 2014, selling hundreds of thousands of handsets to customers every year from its 560 shops.

It earned commission fees from the mobile companies for selling these handsets, often at a low cost.

But the mobile companies wanted to cut out the middleman and did this by “Eliminating Phones4U as a competitive force by driving it into administration ”, Mr MacLean told the court.

They all pulled their products from Phones4U’s shelves in a coordinated push, after secretly reassuring each other that no one would try to take advantage of the situation by hoovering up their rivals’ sales, he said.

The plot involved people at the highest levels, including chief executives who held “brazenly anti-competitive discussions” with one another.

In a bid to cover up these dealings, they had used “Orwellian doublespeak” and deployed “shadowy” tactics, he said. Key documents had also gone missing or been destroyed.

Mr MacLean told the High Court: “We are not here concerned with lowly rogue salespeople.

“What is particularly shocking about what has been revealed is these were the most senior people at these MNOs [mobile network operators].

“They were supposed to be responsible for establishing a culture of compliance from the top down, instead of leading with a bad example.”

Phones4U was started in the 1980s by John Caudwell, the British billionaire, who sold it for £ 1.5bn in 2006.

The company was later bought by private equity firm BC Partners but collapsed in 2014 after Three, O2, Vodafone and EE all decided to pull their products from its shelves.

It led to the closure of hundreds of stores and the loss of more than 2,000 jobs.

The mobile companies have always maintained that their decisions were taken independently of one another.

However, Mr MacLean pointed to evidence of an “extraordinary series of anti-competitive contacts” between EE, Vodafone and O2, during which they had used “euphemisms” such as “market repair” and “structural change” to refer to the destruction of Phones4U.

In one example, Olaf Swantee, the former boss of EE, had met with Ronan Dunne, the former boss of O2, for lunch at the five-star Landmark Hotel in London.

At the September 2012 meeting, Mr Swantee claimed Mr Dunne had brought up concerns that the value of new 4G phones could be undermined by discounting at independent retailers such as Phones4U and Carphone Warehouse.

Mr Swantee said Mr Dunne suggested that O2 would reduce the amount of handsets it sold through independent retailers and urged EE not to take advantage.

However, Mr Dunne, who is now a senior executive at US giant Verizon, denies he meant this and claims his comments were misunderstood.

A clandestine recording of the meeting was made by Mr Swantee on an iPad, Mr MacLean said. The recording, a copy that was made and a transcript had all since been destroyed or lost.

At another point, in April 2014, Benoit Scheen, former chief executive of Orange Europe, is said to have suggested to Philipp Humm, the former chief executive of Vodafone who is now an artist, that they could talk about “a topic for the UK market ”using so-called burner phones.

He suggested they have “’secured’ call with both of us using a new prepaid number”, a tactic that Mr MacLean said was more typical of criminal gangs than telecoms executives.

The companies all deny the claims against them and are set to contest them during the trial, with several key executives expected to be cross-examined.

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