Dixons Carphone to end US joint venture with Sprint network

Dixons Carphone is to end its US joint venture with mobile network Sprint after less than two years because of the "changing US mobile market landscape", the phone and gadget retailer announced on Friday.

Instead, Dixons is concentrating its focus on its Honeybee tablet sales software, used under white label by companies such as Apple, which Dixons will roll out across the Sprint store network.

The US telecoms market has become increasingly competitive in recent years as challengers such as Sprint and T-Mobile have sought to steal customers from established operators Verizon and AT&T by slashing prices and buying up spectrum.

Sprint, which is the fourth-largest US wireless carrier and is backed by Japanese conglomerate SoftBank, has been struggling as the pressure to offer deep discounts – sometimes offering mobile packages for half the cost of the two largest networks – has hit profits.

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Sprint last month reported a steeper than expected net loss in quarterly earnings, prompting SoftBank founder Masayoshi Son to raise the possibility of a merger with T-Mobile to boost returns.

Retail expertise

Dixons Carphone entered into an agreement with Sprint in July 2015 to open and manage a number of Sprint-branded stores in the US as part of an ambitious expansion plan. At the time, Dixons Carphone said it would supply “mobile phone retail expertise”, with an initial trial in 20 outlets.

After the experiment proved a success, the pair said in January 2016 that they would expand the tie-up to 500 stores under the Sprint brand at an expected cost to Dixons Carphone of just $32 million.

But following a review by Sprint of its distribution strategy, the retailer and telecoms group have agreed Dixons will sell its 50 per cent stake in the joint venture to Sprint for an undisclosed amount.

The sale marks the second time in six years part of the Dixons Carphone group has abandoned a US joint venture. In 2011 Carphone Warehouse, which subsequently merged with electronics retailer Dixons to form Dixons Carphone, sold its stake in a joint venture with retailer Best Buy to its partner for more than $1 billion.

The Best Buy exit came after a period of strong growth in the business, which offered advice and sales to Best Buy customers in-store, as well as in some standalone outlets.

Dixons’ prior experience in the US was less successful. After buying the Silo and Tipton electricals chains in 1987 and expanding rapidly, Silo built up huge losses prompting a sale in 1993. – (Copyright The Financial Times Limited 2017)