Phone contract for AO World
AO World has agreed to buy online-only phone retailer Mobile Phones Direct in a “game-changer” acquisition that will expand its mobile offering in time for the introduction of 5G. The £32.5 million takeover will increase AO World’s mobile offering, which is currently limited to handsets only.
Chief executive Steve Caunce said: “This deal represents a significant step forward in our strategy of developing our growing range of online electricals and adding new complementary categories that customers want and expect from AO.” He added that the deal would position the company to take advantage of the rollout of 5G over the course of the next two years.
Meanwhile, Richard Baxendale, current chief executive of Mobile Phones Direct, said: “This new venture marks an exciting moment for both AO and Mobile Phones Direct, creating something that we believe will be a real gamechanger for the industry.”
Last year Mobile Phones Direct and sister site Smart Phone Company pulled in 13.6 million visitors between them.
The business generated £121.7m in revenue for the year ended 31 March and underlying earnings of £5.5m.
The acquisition is expected to be completed in the first quarter of 2019, subject to shareholder and competition watchdog approval.
Aoworldwarnedinjulythat weaker consumer demand had affected summer trading in its core markets, despite a rise in sales earlier in the year.
Analysts Greg Lawless and Clive Black at Shore Capital took a cautious view. “In our view, whilst the acquisition multiple looks attractive and scales the company in a new category, we do not see how this can be earnings-enhancing,” they stated.
“On the one hand this small acquisition scales up the company in a complimentary category – but also complicates the group further.”