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Vodafone has been fined more than £4.6m by telecoms regulator Ofcom over multiple serious and sustained breaches of its code of practice that occurred during a complex IT migration onto a new billing platform.
An investigation launched in 2015 found that 10,452 Vodafone customers on pay-as-you-go contracts lost out after the operator failed to credit their account when they had topped up. Those affected lost a total of £150,000 over about 17 months.
The failure occurred because of errors made during a major IT migration that saw 28.5 million customer accounts and one billion individual customer data fields moved from seven legacy billing and services platforms to a single system.
In common with the rest of the industry, Vodafone disconnects inactive pay-as-you-go accounts after 270 days have passed. At that time, the operator puts the customer’s SIM card into a state known as “pre-disconnection” for 24 hours before removing it from the network.
Because it hit problems in transferring accounts to the new system, Vodafone stopped disconnecting SIMs in the pre-disconnection state, and consequently customers were still able to pay for top-ups when they should not have been. Although the system issued them with receipts, Vodafone did not actually credit their accounts.
The second investigation uncovered breaches of the rules governing customer complaints. Ofcom found that Vodafone did not give its customer service staff clear enough guidance on what a complaint actually was, while its processes were insufficient to ensure complaints were dealt with or escalated appropriately.
Vodafone also failed to instruct customers of their right to take unresolved complaints to the telecoms ombudsman schemes.
“Vodafone’s failings were serious and unacceptable, and these fines send a clear warning to all telecoms companies,” said Ofcom consumer group director Lindsey Fussell.
“Phone services are a vital part of people’s lives, and we expect all customers to be treated fairly and in good faith. We will not hesitate to investigate and fine those who break the rules.”
In a statement responding to Ofcom’s announcement, Vodafone said: “We deeply regret these system and process failures. We are completely focused on serving our customers. Everyone who works for us is expected to do their utmost to meet our customers’ needs, day after day, and act quickly and efficiently if something goes wrong.
“It is clear from Ofcom’s findings that we did not do that often enough or well enough on a number of occasions. We offer our profound apologies to anyone affected by these errors.”
The operator has fully refunded or re-credited 10,422 out of 10,452 affected customers with an average of £14.35. The remaining 30 customers were untraceable – presumably having left the UK – so it has made a £100,000 donation to a number of charities.
Internally, Vodafone has conducted a full interval review and overhauled its management control and escalation procedures, noting that the problem should have been spotted and flagged much earlier than it was.
All of the operator’s consumer accounts have since been migrated to the new system – which is designed to put users in control of every aspect of the products and services they use, as well as improving customer services teams’ ability to respond to questions and problems.
Vodafone said that since doing this, it had seen a 50% reduction in complaint volumes and a significant improvement in its net promoter score.
“We fully appreciate the consequences for our customers of various failures in the migration process over the last three years,” it said. “We have sought to remedy these through an additional £30m investment this year in customer service and training, including hiring an additional 1,000 new UK-based call centre personnel and more than 190,000 hours of training to improve how we identify and resolve individual customer problems.
“This has been an unhappy episode for all of us at Vodafone. We know we let our customers down. We are determined to put everything right. We are also confident that our customers are already beginning to see the benefits of our substantial investment in new systems designed to meet their needs much more effectively in future.”
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Cable.co.uk analyst Dan Howdle noted that the fine was the largest ever levied on a telecoms firm by Ofcom and described the mobile market as something akin to “the Wild West”.
“Virtual network operators migrating across networks, leaving a trail of disgruntled customers in their wake; Post Office Mobile, Sainsbury’s Mobile and others shutting down altogether; falling customer service levels, and in the case of Vodafone – the UK’s most complained-about mobile provider, according to Ofcom’s most recent report – failure even to provide services that customers have already paid for,” said Howdle.
“While the investigation shines a light on inadequate remedial systems within Vodafone, it would be foolish to assume it is alone in its inadequacies. The message is clear to all: fines of this size are the shape of things to come, and preventative measures should be taken, or suffer the consequences.”
Vodafone must now pay the fine – incorporating a 7.5% reduction because it entered a formal settlement and admitted the breaches – to Ofcom within the next 20 working days. The fine will be passed to the Treasury.