Franchise giant Allphones up for sale: Reports

Allphones, the 170-strong mobile phone and broadband chain which started with a single store in South Australia 12 years ago, is reportedly up for sale in a deal that is expected to attract the interest of private equity and telco giants Telstra and Singapore Telecommunications.

The company, which calls itself Australia’s largest independent telecommunications retailer, could be sold for up to $100 million by the end of the year, the Australian Financial Review reports, with earnings before interest, tax, depreciation and amortisation said to be $17 million for the 2010-11 fiscal year.

Allphones, which has company-owned, licensed and franchise stores across the country, recently signed a five-year naming rights deal for a Sydney stadium and brought in a new CEO, Shaun Colligan.

The company’s executives were not available for comment this morning.

The company has recently emerged from a controversial few years.

Its former CEO, Matthew Donnellan, was found by the Federal Court last year to have engaged in a “systematic and prolonged” campaign against a group of franchisees. The company and its executives – Donnellan, Tony Baker and Ian Harkin – were ordered to pay 55 franchisees $3 million plus costs for a prolonged campaign of unconscionable conduct, in a settlement brokered by the competition regulator.

The ACCC said tactics included withholding stock, stopping franchisees’ income while still requiring that franchisees continue to bank daily takings in Allphones’ account and meet other obligations like rent and wages, and hitting them with franchise contract breaches and threats that their franchise could be terminated.

Another action, heard in the Federal Court in 2008, found that Allphones had breached provisions of the Franchising Code by not giving a franchisee – Hoy Mobile – the necessary disclosure documents, and had failed to pay Mobile about $75,000 in commission and bonus entitlements.

The case also found, however, that Mobile had defrauded Allphones out of about $30,000 in fees by unlocking phones and selling them for higher prices without the company’s knowledge.