Networks blamed after cashback collapse

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Godsiff’s comments came as Mobile Media Systems went into administration, owing around 46,000 customers up to £10 million in unpaid cashbacks.

Mobile Media’s business model was predicated on a cashback redemption rate of just 40 per cent. Its directors filed for administration as its actual rate jumped to around 70 per cent, on the back of the publicity in the national and regional press around cashback and the introduction of a new regulatory code by Ofcom in September.

Godsiff, who has invited dealers to discuss the issue of cashback at a parliamentary meeting in the New Year, said the networks had overlooked customers’ vulnerability to the tactics employed by dealers in pursuit of market share.

“The airtime providers, whatever they might say, are complicit in the collapse of Dialamobile and there is mounting proof that in order to get a steady stream of new connections they were prepared to tolerate retailers operating unsustainable cashback schemes which would lead to insolvency if more than 40 per cent of customers applied for them,” said Godsiff.

The networks are pursuing litigation against customers caught up in the recent cashback fiascos for reneging on cashback deals they entered into with defunct dealerships Dialamobile, Mobile Media, Click Mobile, Chatterbox and Mobile Rainbow.

“The airtime providers are still sitting on highly lucrative contacts and are pursuing customers through the courts to pay up. There are a lot of people who will have worrying Christmases because of this. I intend to continue to pursue the matter,” said Godsiff.

A source close to the situation said: “The networks are now pursuing litigation.”

None of the networks were available for comment.

Godsiff met with networks and industry regulator Ofcom at the end of last month to discuss releasing Dialamobile customers from their contracts. He also wants to meet with six dealers in the New Year to discuss the problem of cashback. Ofcom, currently reviewing the voluntary guidelines around mis-selling it issued in September, has asked for 20 dealers to attend a meeting to gauge views on cashback deals.

An Ofcom spokeswoman said: “Meeting independent dealers will help our understanding of the issue. We want to make sure we have spoken to every corner of the industry, so we’re talking not only to dealers, but networks, resellers, consumer groups and conducting market research.”

Chris Caudle, chairman of the Independent Mobile Phone Dealer Association, encouraged dealers last week to get involved in the debate. “Dealers are rarely represented when these sorts of issues are being discussed, but at the end of the day it’s dealers that take the brunt of the consequences, while the networks always sit pretty with a win-win situation,” he said.

 

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