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Dixons agrees to US pilot programme

Article By: ,  Financial Analyst
July 2, 2015 5:36 PM

Dixons Carphone has agreed to work with US telecoms provider Sprint in a deal that could see the opening of 500 stores in the US.

To begin with, the company has agreed to open and manage 20 Sprint-branded shops – this will be a pilot programme to test the market and see how the stores perform.

Depending on the success of the pilot, the companies will work together towards the second phase of the project, which could mean the opening of up to 500 more American stores.

The second phase of the project will include up to $32 million (£20 million) of investment from Dixons Carphone – and this will give them a 50 per cent stake in the joint venture.

Last year, Dixons saw another major expansion project when it merged with the Carphone Warehouse to become Dixons Carpohone.

Deputy chief executive at Dixons Carphone, Andrew Harrison, called the deal with Spring a "very exciting venture" and said it is a major step towards growing the business in the US.

"We bring specialist knowledge and skills to this partnership and will be looking to deliver innovation and outstanding customer service under the Sprint brand," he said.

Sprint is the third-largest wireless broadband provider in the US. The firm also owns Boost mobile and Virgin mobile phone networks.

Previous attempts in the US market

This isn't the first attempt at breaking into the US market for Dixons. In 1987, the company bought Silo, an American electrical store chain for £210 million, but the endeavour was not a success and by 1992, they were losing £22.4 million a year, reports the BBC. In 1993, Silo was sold to Fretter, a Detroit-based firm.

Retail analyst Nick Bubb commented on the latest American deal, saying that the experience Dixons had with Silo was "etched on the corporate psyche." According to the BBC, he believes the company's history with the US market explains why it has taken such a cautious approach this time around.

Carphone Warehouse, on the other hand had a successful tie-up with Best Buy in the US through the Best Buy Mobile joint venture. In 2012, Best Buy bought out Carphone Warehouse for $1.3 billion.

At 15:30 BST on Thursday (July 2nd), Stock for Dixons Carphone was up 1.22 per cent to 464.40.

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