Dealers are fearing for their futures after the operator scrapped its upfront payment model for an alternative method
Vodafone dealers are fearing for their futures and threatening to churn connections to rivals following the operator’s decision to scrap its upfront payment model in favour of revenue sharing.
Furious dealers told Mobile News the changes came into effect at the beginning of this month. The upfront model saw Vodafone pay a dealer what they were owed for an entire contract once a customer had signed up, along with an average commission payment of 36 per cent.
The revenue sharing model will pay dealers on a monthly basis instead, with commission rates dropping from 36 per cent to 31 per cent. Several dealers expressed concern they will be unable to afford the supply of handsets to customers as a result of the new payment structure, with some claiming to be an average of up to £15,000 worst off.
Dealers were notified in May through a combination of emails and meetings with their Vodafone managers.
One dealer, who wished to remain anonymous, said: “They used to give us the spend up front on day one, so we could afford to get the customer the number of handsets they wanted.
“However, the revenue sharing model doesn’t fund much and they’re forcing the dealers to pay for the kit themselves. Imagine if you get a customer who wants 20 iPhones on a two-year deal. That’s up to £15,000 in hardware costs.
“Smaller dealers will be wiped out because they don’t have that sort of cash in the bank right away.
“They are scurrying to airtime distributors. It’s easier to churn our base to EE and O2 with the distributors because there won’t be any penalties like there is direct with Vodafone.”
Pushed to distribution
Other dealers expressed concern that the mobile operator had decided to scrap upfront payments as a way of shrinking its partner programme to focus on the larger dealers placed in the Total Communications category.
A separate anonymous dealer said: “Larger partners can be on revenue share because they have a lot more bigger customers and they’re earning more money. It feels like Vodafone is purposely cutting back on the channel.
“Smaller dealers are being pushed to distribution because you can still get upfront payments there,” said another.
“It makes more financial sense to move to distribution if you’re a small partner. There’s very little reason to stay direct with Vodafone if you’re not one of the big dealers.”
Vodafone declined to comment.