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DSNS disputing O2 SIM card clawback claims

Paul Withers
August 8, 2012

Data Select Network Solutions disagrees with reasons given by operator for clawbacks as parent company Expansys posts rise in sales and profits, but UK business struggles

Data Select Network Solutions is disputing a clawback from O2 over consumer SIM card misuse, stating it does not agree with the reasons given by the operator for the claim.

It follows a story revealed exclusively by Mobile News in issue 518 (July 16, 2012) that O2 SIM card distributors are facing clawback charges of up to £1 million as a result of so-called fraudulent use of its international SIM tariffs by end users.

The clawbacks relate to O2 SIM cards distributed between January and May this year. O2 told its distributors that clawbacks relate to SIMs that have been used to commit ‘gateway fraud’ – an act which occurs when free or low-cost calls and texts are channelled through a third party to reduce international fees.

Distributors had told Mobile News that O2 is penalising them for premium rate text messages that were sent on the SIMs – something that is not in their terms and conditions and which they have never been charged for previously by O2 or other networks.

They claimed instances of clawback include when customers use their credit to pay for services such as placing a bet or even making charity donations.

Expansys chairman Bob Wigley said: “We are aware of recent reports in the mobile industry press concerning clawback claims being faced by a number of UK SIM card distributors as a result of a UK mobile network provider alleging consumer misuse of SIMs last year.

“DSNS is among a number of distributors who have received a clawback claim but the company does not believe the network provider has demonstrated a valid basis for its claim and is in discussion with the network to resolve the situation as soon as possible.”

Wigley’s comments came as parent company Expansys published its financial results for the year ended April 30, 2012. Sales increased by a third (33 per cent) to £108.5 million, and were up 24 per cent on a like for like basis.

Pre-tax profit increased by 27 per cent to £4.3 million, with the company reporting a profit of £1.9 million, compared to the £700,000 loss made in the previous year.

Expansys CEO Anthony Catterson said: “Expansys has delivered another year of significant growth, passing through the £100 million revenue mark whilst increasing profit to £4.3 million on an adjusted basis. This was despite a very challenging environment.

“Through our mix of retail, distribution and multi-channel commerce skills, the Group is now emerging as a unique provider of end-to-end services for network operators and manufacturers in the telecoms and electronics markets globally.

“We believe these full service capabilities will continue to drive attractive revenue and earnings growth in the medium to long term. We are expecting significant growth in the USA and Asia to continue, with improved retail profitability in the UK.”

However, Expansys’ UK business suffered in the financial year, with sales down 15.7 per cent to £18 million. It’s losses also increased to £2.1 million from £1.3 million in the previous 12 month period.

Catterson added: “Our UK business suffered significantly in FY12, as we faced a multitude of challenges ranging from the well-publicised economic environment to a substantial relocation of our UK business to consolidate operations in our corporate headquarters in Marlow. This had a negative effect upon the operation, which made a loss for the year.

“However, trading since Christmas has been more encouraging and we expect a much improved performance in the UK business in FY13. We will continue to concentrate resources and investment into the regions we believe offer a more attractive landscape and return in the short term such as the USA and Asia.”

Sales at DSNS were up 77 per cent to £23.1 million but profits slipped slightly to £3.2 million compared to the £3.2 million profit made in the previous financial year.

Catterson said: “We continue to win market share in the important retail channel, and in the last 12 months have signed agreements with a number of the largest high street retailers. These agreements now mean we have close to 40,000 exclusive points of distribution in the UK, which makes DSNS an attractive proposition for the network operators and ambitious MVNOs.”

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