Ovivo Mobile collapsed with £2.3m of debts

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Former MVNO blasts MVNA Cognatel over failure of the business as liquidators are appointed

Collapsed Cognatel MVNO will enter voluntary liquidation on May 2 with debts of more than £2.3 million.

The figures were revealed in documents released by liquidators Accura Accountants which also put the blame for the company’s failure at the door of its MVNA Cognatel.

Ovivo Mobile suddenly stopped providing its advertising funded service last month and Mobile News revealed that a dispute with Cognatel was understood to be behind the closure.

The company claimed it had 71,000 customers at the time of is closure, an increase on the 50,000 that chief executive officer Dariush Zand stated when speaking to Mobile News around a month before its closure.

Ovivo creditors were listed as: potential customers (£808,486), trade and expense (£627,670) convertible loan note (£312,350), customer (£212,125), shareholder loans (£256,617) and directors (£96,047).

All creditors are unsecured and unlikely to see any return. The only asset listed to realise any value on the MVNO’s books is a VAT refund worth £84,717.

The directors of Ovivo Mobile are Zand, Tony Fish, David Leslie Jones, James Longley and Martin Stephen Smith.

A document provided by Accura to creditors, which includes thousands of people who had purchased Ovivo SIMs, saw the director’s blame Cognatel’s “continued failure” to provide a way to uniquely identify each user, so that targeted advertising could be pushed towards them.

It also listed an inability to secure a meeting with Cognatel to discuss the issue and “resultant cash flow difficulties” meaning the company was unable to pay the MVNA leading to the cutting off of its service.

The lengthy document claims that problems around providing real time billing (usage reports) and identifying customers were present from the beginning, and had even led to the launch of service being delayed by a month, until the end of April 2012.

It also says that workarounds offered by Cognatel that were provided to allow it to launch didn’t work. This, it was claimed, lead to some customers being able to use “excessive amounts of data” as usage reports were not supplied until up to six weeks later.

The directors say this led to a suspension of advertising services in August 2012, at a time when the service had 5,000 customers.

By December 2013, Ovivo director’s say that a two point plan to introduce both real-time billing and customer identification was put in place. The former was to be live by April 2013 and the latter by the summer.

During this period the company sought and received a £150,000 investment though crowdfunding website, Crowd Cube in return for a 7.5 per cent stake in the company.

The document says that it was finally able to introduce advertising in June 2013. It also says that in October 2013, the MVNO received a “verbal assurance” from Cognatel chief executive officer Mark Ashdown that the facility to uniquely identify each user would be in place before Christmas.

Prior to this assurance allegedly being put in place Ovivo embarked on a further round of crowdfunding securing a further £418,080 through Crowd Cube in August 2013.

In late 2013, the company also engaged financiers Strand Hansen to raise £3 million worth of financing to provide working capital although it seems no cash was actually handed over.

The directors claim that the agreed deadline for delivery of unique identification passed and the company started to face “increased cash burn” as it was unable to generate advertising revenues.

At this point, it was unable to keep up with its pre-payments for airtime and says it was requesting three way meetings with Cognatel and Vodafone. They allege that Cognatel refused to participate in any such talks.

With its debt to Cognatel standing at £143,000 (including VAT and aggregator’s associated margins) in January 2014, the document says that CEO Dariush Zand provided a loan of £70,000 and a further £50,000 business loan was secured.

In February it claims that “continuous” attempts were made to set up meetings with Vodafone which were not granted until March. During these discussions Ovivo says it received assurances that the unique identification service would be in place by June.

During this period an advertising campaign with a major partner was cancelled due to the lack of a unique identification system. The director’s claimed that they were unable to supply investors with the assurances they required to secure investment, meaning the cash flow situation was becoming grave. Other investors reportedly indicated a willingness to invest if a guarantee for the June deadline was provided.

With director’s claiming that Ovivo was struggling to make its payments due to the connectivity issues and a three-way meeting between all parties due for the following day, connections were turned off at 6pm on March 19.

Mobile News has been unable to speak to representatives of Ovivo Mobile and Cognatel despite repeated attempts.

It has also emerged that MoneySavingExpert.com, the website run by Martin Lewis, which recommended Ovivo Mobile in the run-up to its closure has reported it to reporting body Action Fraud and complained to The Insolvency Service.

4 COMMENTS

  1. I think you will find that Ovivo raised considerably more than £150k on Crowdcube – didnt they come back and have a second go? At any rate Crowdcube should be held liable for some of this damage – they clearly have very poor due diligence as the Ovivo CEO is a serial disaster. If you run a company and the way it runs doesnt work you cant turn around and blame a supplier – you booked that supplier so its your fault. An amusing twist on this is that Crowdcube grandly announced at the end of 2013 that Ovivo had won its Business of the Year Award. Watch out for that one if they try to give to you! Muppets.

  2. MSE should refund £20 plus consequential losses to customers who followed its recommendation, which incidentally MSE expected to be paid for. 20,000 new customers in the last month – where did they come from? Reporting the company is a PR stunt no use whatsoever.

  3. I’m not sure I’d unreservedly accept everything Ovivo alleges there. There were obviously good enough back office systems to identify customers for billing purposes, as it was possible to log in to the account and see usage details, data and in and out calls and texts.

    They’d have had a job to identify me as a unique user of adverts though.

    I was never served a single independent (i.e. not an Ovivo page itself) advert in 20 months or so, and had simply no data connection at all for the last 3 months of its operation. Going by some online discussion I wasn’t along in having some data frustrations then.

    Other brands seem to be doing ok so far at using advert-derived credit – Samba, Upptalk, Textme, Textfree and a range of other free text and calls services – but these are more like a prepaid model, the user watches the ads first to build up the entitlement.

    Maybe Ovivo was more of gamble was in putting the free use out there and hoping to get the revenue in later. Some people will have used only the free calls and texts without any browsing, and at the other end there are always a handful who want to throw any concept of fair usage on data out of the window.

    And that is one of the points in Mr Zand’s account I don’t understand – the discovery that some people were using vast amounts of data seems to be followed by de-restricting it completely, not making them see any ads at all.

    And how could users of customised applications other than browsers be shown adverts anyway?

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