Carphone Warehouse and Dixons to merge

UK retailer and service provider Carphone Warehouse has agreed to merge with electronics giant Dixons, marking a push into the high street when many shops are closing down.

The two companies expect to achieve integrated mobile retailing and procurement synergies, together with cost savings of at least £80m on a recurring basis from the financial year 2017/18. The benefits are expected to be delivered progressively, with the firms achieving almost half of them in financial year 2015/16.

According to Kester Mann, principal analyst for operators at CCS Insight, the merger between a consumer electronics retail giant and one of the UK high street’s leading mobile distributors is a logical and forward-thinking move for both companies.

“The combination of two well-known brands will create a potent force on the high street that will offer significant opportunities to both in terms of scale, cost-cutting and distribution,” Mann said. “The motivation behind the deal reflects some of the challenges mobile phone retailers like Carphone Warehouse are facing. UK operators are cutting their dependence on distributors in the face of falling revenue. Indeed, 3 recently ended its relationship with Carphone Warehouse altogether. The smartphone market in the UK is rapidly approaching saturation and more people are buying mobile subscriptions on a SIM-only basis,” he said.

The deal follows the recent announcement that Vodafone will open around 150 new stores in the UK as part of a fresh push involving direct and indirect sales channels. Meanwhile, 3 and EE are upping their efforts in their retail operations.

“The increased complexity involved in buying a smartphone needs staff to demonstrate products and educate users, and this can’t be done by online retailers,” said Mann.