Will Orange dump Carphone Warehouse?

A day after the UK’s Carphone Warehouse was effectively dumped by Vodafone, Orange has signaled that it may well halt its contract sales with the reseller.

In a statement, Orange said: “Since our indirect distribution costs have gone up significantly over the last few years we are in the process of reviewing our independent strategy for 2007.” In industry speak this is widely interpreted as Orange digging its heels in and arguing for lower commissions from Carphone.

The statement adds: “Our relationship both with Carphone Warehouse and Phones4U remains unchanged,” but one source indicates the pair are now in full-blown negotiations with Orange demanding Carphone drop its commission.

On Thursday, Vodafone announced its decision to sell monthly contract mobile phones only through Phones4U starting November 30.

While Vodafone’s move was unexpected, arguably the company had no choice and was simply trying to reduce costs in a market where profits from voice calls are dropping.

Carphone, a recent entrant into the UK broadband market, denied Thursday that the Vodafone pullout would affect its business negatively and that it would continue to sell Vodafone’s Pay-As-You-Go contracts.

Carphone Warehouse did not return requests for an interview.