Vodafone drops Carphone for Phones4u in UK deal

London, Oct 12: Vodafone Group Plc is to drop Carphone Warehouse in favour of rival retailer Phones 4u to sell its mobile phone contracts in Britain, the mobile giant said on Thursday.

The announcement knocked shares in Carphone, Europe's biggest mobile retailer, as much as 12.7 percent lower.

A spokesman for Vodafone said the group hoped to pay lower sales commissions with the change, expected to take effect by the end of November. ''Commissions will come back down to where they were last year,'' the spokesman said.

Intense competition among mobile operators in Britain, which has more mobile phones than people, has been to the benefit of mobile retailers, enabling them to earn better commission for each customer they sign up on behalf of networks.

Vodafone said the deal would make Phones 4u, which was acquired by private equity group Providence from owner James Caudwell last August, the exclusive third party retailer for Vodafone's contract customers.

Vodafone said Phones 4u had a good reach in the market among 16- to 34-year-old people. It currently operates from 384 sites in Britain and has plans to expand its network to 450 by mid-2007.

Vodafone is talks with Carphone regarding the future of their relationship in prepaid connections.

Carphone shares, which rallied on Wednesday after it announced the acquisition of Time Warner Inc's AOL UK Internet access business, were 11.24 percent down at 319-3/4 pence by 0856 GMT.

Vodafone shares were 0.19 percent down.

Reuters