Can Dixons Carphone survive now BT/EE has pulled the plug?

Hard on the heels of O2 pulling out of Dixons Carphone the shock, and dare I say possibly catastrophic news is that BT/EE are also severing a 20 year relationship with the retailer.

In our recent blog about O2’s rationale for leaving CPW and what it meant for the market, we speculated that BT/EE could win extra share of the category. But it appears that EE was unable to agree terms.

There’s no doubt now that EE’s decision will cause a chasm for CPW. Firstly, it could prompt a wobble with Vodafone. Secondly, the group of consumers that once gravitated to the high street darling because it was independent, might not be so willing to do so now. After all, if your line up only represents 40% of the market (one MNO and a handful of MVNOs) you can’t be considered an independent advisor.

It all feels like very bad timing when CPW has relatively only recently announced it will leave the high street. A strategy designed to get CPW stores in Currys and PC World working harder. But now you have to say the outlook is pretty glum. Granted, no one could predict a pandemic but now that strategy really falls flat.

You could argue that it still has its MVNO iD (on the Three network) to fall back on. True. It’s grown the brand significantly and has well over 1million customers. It’s a success story. But the model for acquisition has always been through the CPW stores. With 531 fewer stores on hand, and less of a consumer pull to go into a shop today, iD no longer has all the options it did at launch. Safe to say, I think we’ll see iD’s acquisition number start to slow significantly.

But could it be part of the plan? Does Dixons Carphone already acknowledge this risk and could it be is warming up to sell off the iD family silver? They have done this before with previous MVNO Talk Mobile (sold to Vodafone) and when Three’s CEO Robert Finnegan talked about consolidation a way to realise immediately value from iD may have presented itself. Extra customers for Three would give its retail numbers a boost not to mention the retail revenues (Though I admit the consolidation ambitions Robert has, might be grander than this!).

What is clear is that there is a very real risk of CPW being consigned to history, like the previous Dixons mobile phone retail chain The Link. Remember them? I do, I opened their first store, but that’s another story…

Overwhelmingly the pressure is on Alex Baldock now. Dixons’ mobile revenue for its 2019/2020 financial year saw a 20 per cent annual decrease to £1.589 billion. Yet commitment to the sector remains, citing mobile as the number one technology for customers, therefore it will continue to work on being the number one destination for tech. There’s even talk of more flexible transparent mobile offerings in 2021 to give customers better value.

But it can’t come soon enough, especially when there is a question mark over whether the brand will still be a destination or even relevant next year. Already retailers that sell unconnected hardware are filling the void using services like C-Tech that does all the operator and credit checking integration for them. It makes it easy to take advantage of the extra commissions for selling connected services with relatively minimal effort. No brainer.

So, the short story on all of this change is that CPW has to act fast or it will face the music.

If you need help working out what this means for you then speak to us. We know this market inside out and can help you work out a clear path.

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James Gray

Managing Director at Graystone Strategy

James has over 20 years of experience working in the telecoms and retail industries. He is an expert in subscription-based business models, CRM, direct and indirect channel management and major proposition development and launches. He has held a number of Marketing Director and Consumer Director roles.