Carphone Shares Plunge On Vodafone Deal With Rival

LONDON -(Dow Jones)- Carphone Warehouse shares fell more than 16% early Thursday after Vodafone Group did a deal with a rival that means the UK mobile retailer will no longer be able to offer Vodafone contracts.

Vodafone announced a deal in which Phones 4u would be the only high street seller of Vodafone phones on contract terms apart from Vodafone's own retail chain.

At 0930 GMT Carphone Warehouse shares were down 46.25 pence or 12.8% at 314 pence.

Vodafone shares were flat at 130.5 pence.

The move hows "the game is changing" with power shifting from independent handset retailers like Carphone Warehouse to the operators, said Damien Chew, an analyst at ING.

"Some of the independent handset retailers have been beneficiaries of high commissions for signing up customers. As operators focus on retention these will fall," he noted.

In a statement, Vodafone said it and Phones 4u "will benefit from supply chain efficiencies and will work together to market mobile products and services."

From Nov. 30., UK customers wishing to sign up to Vodafone mobile phone contracts will only be able to do on the high street at Vodafone and Phones 4u stores.

A spokesman for Vodafone told Dow Jones Newswires that the company expects to cut its commission rates paid to retailers by 20% by signing an exclusive deal with Phones 4u, a retail chain sold to private equity firm Providence Equity Partners by the Caudwell Group for GBP1.46 billion in August.

Nick Read, Chief Executive of Vodafone UK, told Dow Jones Newswires that the company has taken the decision because it is increasing its own high-street retail presence and plans to have 100 stores in the UK by April 2007.

In the past, Vodafone marketed its services through numerous retailers but multiple partnerships are no longer economically viable, Read said.

"The volume is not there to sustain all these players," said Read.

Company Web site: http://www.vodafone.com

-By Daniel Thomas, Dow Jones Newswires; 44-20-7842-9264; dan.thomas@dowjones.com

(END) Dow Jones Newswires"

Posted to the site on 12th October 2006