Online electrical retailer AO World has conditionally agreed to acquire online-only phone retailer Mobile Phones Direct for £32.5 million.

According to a statement, the deal will significantly increase the scale and sophistication of AO’s mobile proposition, which is currently limited to the sale of handsets only, without airtime or associated services.

AO described it as a significant step in the strategy of developing existing categories and services, and adding new complementary categories for the benefit of customers. “It also provides access to a large and important market which is adjacent to AO’s current electricals offering and is well positioned to benefit from continued online migration,” read the statement.

The acquisition is expected to complete by the end of March 2019.

Steve Caunce, chief executive of AO World, said: “Mobile Phones Direct already has a leading position within the UK online mobile phone market and is a business which is highly complementary to AO.

“With 5G services expected to launch over the next two years and as the electrical products we sell become more connected than ever before, moving further into the mobile market is a logical next step for us,” he added.

Zoe Mills, retail analyst at GlobalData, commented that moves like this are essential, given the impact of weaker consumer demand on big ticket items like washing machines and fridge freezers, as housing transactions stagnate and consumer confidence remains low.

“While AO World already has a sim-free mobile phone range, Mobile Phones Direct gives the electricals specialist access to mobile networks, as well as the opportunity to develop its service proposition with the potential to expand into broadband services and complimentary smart devices,” she continued.

“This also allows it to achieve instant access to this market with a well-established player rather than building relationships with network providers and developing this division from scratch, ensuring that it enters this new market with a competitive edge.”

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