Like a naughty school child, Vodafone has been given a monumental bollocking by Headmaster Ofcom today, and walked out with a £4.6 million fine for being a very naughty boy.
The fine comes from billing malpractice and generally being rubbish at dealing with complaints brought up by customers. We covered the intricacies of the Ofcom investigation earlier this year, but to recap:
Vodafone? More like Vodamoan – see what we did there?
So it looks like the drinks are on HM Treasury after the combined fine of £4.6 million gets passed on to the Government after Ofcom turns Vodafone’s pockets inside out.
Actually, back in our coverage from April, we did a bit of digging into the Communications Act 2003 and found out that Ofcom was actually well within its rights to fine Vodafone up to 10% of its annual revenue, so the operator has gotten off pretty damn lightly compared to the fire and brimstone punishment Ofcom could have slapped it with.
Vodafone was quick to issue a statement it had clearly prepared a long time ago, just waiting for the excrement to hit the fan. Words like ‘regret’ and ‘apologies’ were used as it tried to demonstrate contrition and attempted to mitigate the unmitigated disaster; and basically blamed it all on the aforementioned botched IT migration.
“The matters under investigation were a consequence of errors during a complex IT migration which involved moving more than 28.5 million customer accounts almost one billion individual customer data fields from seven legacy billing and services platforms to one, state-of-the-art system,” the operator said in a statement. “…at various points a small proportion of individual customer accounts were incorrectly migrated… Those errors led to a range of different problems for the customers affected which – in turn – led to a sharp increase in the volume of customer complaints.”
It went on to explain the fault occurred on dormant PAYG SIM cards which hadn’t been topped up for more than nine months. When customers tried to top up the SIM again, they would receive confirmation from Vodafone, while errors in the now much maligned billing system meant the SIM in question continued to be flagged as disconnected.
Lots of facepalming going on at Vodafone today, you’d reckon, and maybe one or two surreptitious celebrations too.
Here’s some market reaction:
Matthe Howett, Ovum:
“This isn’t the first time Ofcom have levied a fine for this type of thing, but is certainly the largest and reflects the scale of the problems Vodafone has had. EE were fined £1m last year for its complaints handling process and TalkTalk and Tiscali were fined £3m in 2011 for billing issues.
“In 2015 Ofcom changed its approach to sanctions. While the changes weren’t revolutionary, they did suggest a more aggressive stance would be taken, particularly in telecoms, to protect the consumer with larger fines designed to act as a deterrent. Also, the ‘seriousness’ of the practice was to be given more weight when determining how severe the fines would be.
“I think all of that is reflected in today’s announcement. Vodafone would have been expecting a fine, particularly given the length and breadth of the investigation. Their conciliatory tone this morning suggests they are now trying to move on from the damage and repair reputations with customers. To that end, they are investing billions in improving service, rolling out more 4G and so on.”
Richard Neudegg, uSwitch.com:
“A fine of this size shows just how seriously Ofcom is taking failure to deliver correct service and follow the rules on complaints. In the case of Vodafone more than 10,000 customers failed to have their PAYG accounts credited despite having ‘topped up’ – and Ofcom clearly feels their subsequent handling of complaints was sub-standard.
“If telecoms companies don’t resolve consumers’ issues internally, customers have a right to contact one of two free-to-use resolution schemes to get things sorted.
“Access to an Ombudsman is of huge importance. It gives people who feel they’ve been let down by a service provider another route to resolution.
“However, the telecoms market’s complaints procedure is more confusing than other regulated sectors. There isn’t one single Ombudsman – there are two that companies may direct customers to. So it’s extremely important that information on how to access these is completely clear.”
David Cheetham, XTB.com:
“Whilst the number of effected customers is minimal compared to the total 20 million Vodafone users in the UK, the ongoing investigation which led to the fine has been an unwanted headache. With the matter now put to bed, investors will hope that the firm can move on and look to build on a solid if not spectacular year so far which has seen the stock rise around 10%.
“Given the external headwinds such as this investigation and the EU referendum shock, this performance may be viewed as relatively favourable and the telecommunications company will likely be pleased to have drawn a line under the whole incident and take their medicine in the form of a sizeable fine which incidentally, is the single largest to have ever been issued by the telecoms regulator.”