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Last Updated: Thursday, 12 October 2006, 15:23 GMT 16:23 UK
Carphone knocked by Vodafone move
Carphone Warehouse store
Carphone is Europe's largest mobile phone retailer
Shares in Carphone Warehouse have fallen by 12% after Vodafone said the retailer would no longer sell its mobile phone contracts.

Vodafone is giving rival Phones4U an exclusive contract to sell monthly phone subscriptions, an arrangement it currently shares with Carphone.

Carphone, which will still sell pre-pay connections, said the change would not harm its financial position.

Vodafone said the move would reduce the amount it pays in commissions.

'Commercial logic'

The change in arrangements will come into effect on 30 November.

Carphone Warehouse has a larger retail presence than Phones4U and the deal is a major boost for the latter, recently sold by its founder John Caudwell to two private equity firms for 1.46bn.

About 40% of Vodafone's network connections are sold on a contract basis, typically over a year to 18 months.

Carphone Warehouse will continue to retain its core customer values of independence and impartiality
Carphone Warehouse

Vodafone said its decision to consolidate this business with Phones4U reflected the fact that the bulk of these sales now took place through its own stores and via the internet.

It was looking to save money on its remaining sales through third-party retailers, a spokesman said, particularly as sale commissions had risen sharply in recent years.

"There is a commercial logic to this," a spokesman said.

He added that Phones4U was popular with the 16-34 age group, a market which the firm was keen to target.

'Core values'

Vodafone would not comment on speculation that it was also looking to consolidate sales of pre-paid connections with a single retailer.

Carphone said it did not expect the lost contract to affect its profit expectations this year or in future years.

Phones 4U store in London
Phones 4U has 384 stores in the UK

"Carphone Warehouse will continue to retain its core customer values of independence and impartiality, and offer customers the most appropriate network proposition," the retailer said.

Vodafone's decision comes a day after Carphone Warehouse revealed it had won the auction to buy AOL's UK business.

Carphone Warehouse has more than two and half million phone customers through its Talk Talk service and competes with Vodafone in France through its Virgin mobile phone joint venture.


SEE ALSO
Carphone Warehouse buying AOL UK
11 Oct 06 |  Business
Carphone's broadband costs grow
11 Oct 06 |  Business
Record 14.9bn loss at Vodafone
30 May 06 |  Business
Phones4U boss Caudwell sells up
07 Aug 06 |  Business

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