Wednesday 1 April 2020 11:49 am

O2 cuts ties with Carphone Warehouse as retailer plots store closures

O2 has cut commercial ties with Carphone Warehouse after the mobile operator refused to accept revamped terms for their partnership.

The tie-up, which has been in place for two decades, saw Carphone Warehouse take a commission for its sales of O2 phone contracts in store and online.

Read more: Carphone Warehouse to axe 3,000 jobs as it shuts all standalone stores

But the longstanding relationship came to an end this morning after the two firms failed to agree on the terms of the deal and let the contract expire.

It comes just weeks after parent company Dixons Carphone announced it would close all 531 of its standalone Carphone Warehouse stores.

The firm said the move was the next step in the turnaround of its mobile business. Mobile products will now be sold through concessions inside 305 large Currys PC World stores and online.

But the electronics retailer has now been dealt a major blow to its plans after losing one of its largest mobile customers.

Shares in Dixons Carphone closed down 3.3 per cent at 75.5p.

While the two companies had been negotiating terms for the contract renewal for the last year, it is understood the store closures came as a surprise to O2.

“It became clear to both parties that we didn’t have a deal that was beneficial to both parties,” a source familiar with the discussions told City A.M.

The source said O2 was prepared to continue with its existing partnership, but was unhappy at the “shift in balance” of the relationship that Carphone Warehouse was demanding.

The retailer, which is set to make a £90m loss in its mobile division this year, is preparing to launch a range of new offers in response to changing consumer behaviour, as customers hold on to their handsets for longer.

Kester Mann, telecoms analyst at CCS Insight, said the expired contract was a “huge blow” to Carphone Warehouse, adding that it called into question its relationship with other partners such as EE, Vodafone and Virgin Media.

O2 has other retail deals in place with fashion chain Next and ecommerce site

However, the decision may signal a change of strategy for the mobile operator, with a new focus on its content and services partnerships rather than its retail tie-ups.

The company has major sponsorship agreements with England Rugby and AEG, which owns The O2, and earlier this month secured a deal to become the exclusive UK mobile distributor of Disney Plus.

Read more: O2 pairs up with Disney Plus to be its UK mobile network distributor

An O2 spokesperson said: “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 said: “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. This offer is set to launch later this year.”