PRESS STATEMENT 

The IMPDA (Independent Mobile Phone Dealers Association) are dismayed that Networks seem to have little thought for small and medium dealers.  As announced in Mobile Today, O2 is imposing a major change to its commission model by bringing in an ongoing revenue stream with low upfront payment on 1^st October. This will hit dealers hard, and would make it a serious possibility that many will go out of business or shut up shop as they would not be able to sustain sales, due to massive drop in cash flow and the inability to subsides handsets, with a low upfront payment regardless of what they will get in the months to comeWith Orange following suit this would have a major impact on all uk dealers? 

We hear that even 3 are not considering this at this time, but others are.  What is surprising and disappointing is that there is no information being given to dealers on what payments they are likely to get so they can see and plan what to do on the 1^st October when the first customer is dealt with.  With such as major change to their cash flow forecasts and without notice how does the network expect dealers to have loyalty to them.In O2’s case they said that they had trialled such a scheme with some of its major b2b indirect partners in the past.  Note that word MAJOR partners, yes for those that have a chest of money and who can afford to pay and give handsets to customers, when they will not receive enough up front commission to pay for it initially, is fine, as the large companies will probably have a different agreement in place with the network that would minimise the effect. 

But the ordinary small to medium dealer just cannot afford to do that.Are the Networks asking or trialling the scheme with small to medium businesses to gauge the impact on them?  Are they consulting small dealers? We doubt it; they seem reliant on the BIG partners, and ignoring the small to medium dealers. This will be a major change to the Networks terms and conditions with serious implications for dealers.

What is surprising is that with only a few days away from implementation the network has not seen fit to notify their dealers of the change and what they will get which is needed to cover overheads as well.If all the networks go that route, many if not hundreds of dealers could see themselves going out of business, or as we have been suggesting for some time, a mad dash to diversify and get other products in to sell, or get out of mobiles altogether, that is not good for competition or the consumer, or indeed the Networks shareholders.

Sales would plummet as dealers will not be able to afford to subsidise the handset from the low upfront payment and what does that then leave the dealer to cover overheads, this is in addition to consumers losing choice, as dealers will not be able to offer a good range, and if dealers close up then the consumer will have to travel further to get a decent package, from a reduced choice of supplier.  As one major distributor Managing Director has already said ‘The mathematics of it dictates that you need a war chest to live with it. It’s a serious hit on cash flow.’

Dealers will be making a loss at the point of sale of a transaction, and possibly for several months as they will sink cash into handset subsidy while only seeing a small immediate return, and that is not sustainable by small dealers.

We will have to wait and see what the upfront payments are going to be, but we would issue a serious warning to all other networks planning the same thing, please take the small and medium size dealer into account, don’t just reply on your Major partners, they have the money to do this other dealers don’t.If it appears that all the networks do follow suit and they do not engage with the small to medium dealers to gauge the impact, and that it looks like the effect on small and medium dealers would be such that they will be damaged by it then the IMPDA will reluctantly have to take this up with Ofcom, under the competition rules.

On going revenue streams are good for dealers but not at the expense of losing customers, cash flow and possibly your business.We have said time and again that the networks need to engage with us so that serious impact on dealers can be avoided, this is a prime example of where they should have engaged with us and dealers and not just rely on their big partners, and give details well before a week before implementation.   

We would ask all Networks especially those who have not yet launched their schemes to get in touch with us to discuss this issue as soon as possible so that the impact on small and medium dealers is taken into account. We should all be working together in this industry, If the networks don’t take into account small and medium dealers its blindly clear that they don’t support their dealers, despite the statements they make, and it will prove beyond all doubt that the only time they care is when they need their consumer base increased.  That is not working together, that’s called dictatorship, and dealers are now fed up with being dictated to instead of consulted especially on issues as fundamental as this.  We would challenge and ask all networks to contact us at the earliest opportunity.