Vodafone axes largest contract seller

Britain's Vodafone has stripped The Carphone Warehouse of any right to sell its contracts, as the telco suspects the retailer of stealing its clients, The Mail on Sunday reported.

The mobile phone giant last week ended its long-standing relationship with Carphone, controlled by billionaire entrepreneur Charles Dunstone, and gave rival Phones4u an exclusive deal to sell its non-prepay handsets, the report said.

The announcement took Dunstone by surprise and rocked Carphone's share price, before it rallied late on Friday.

Cracks in Vodafone's relations with Carphone emerged in the summer when the network operator ended a deal where Dunstone's outfit ran call centers and handled customer services for Vodafone's new clients, the newspaper report said.

"The crucial part was customer retention. Carphone's business depends on signing up new contracts and it is in competition with Vodafone. Arun Sarin, Vodafone's chief executive, was furious that too many customers signed up at Carphone were switching away from his operation." a senior industry source was quoted as saying.

According to the report, the loss of the deal is a serious blow to Dunstone, who is dealing with mounting losses and customer complaints from the "free" broadband offer launched by his TalkTalk business.

"Vodafone's exit seemed timed to humiliate Dunstone just after he had seen shares soar after buying AOL's UK operation for 370 million pounds ($690 million). It looked almost malicious," an analyst was quoted as saying.

Vodafone refused to comment on the allegations, but a spokesman said: "This deal was not about money. It was driven by a search for a partner," according to the report.