Staff Reporter

Details of the raid were revealed by Treasury minister John Healey in a briefing made at 11 Downing Street to personnel from the mobile phone and computer chip industries including representatives from Vodafone Nokia Motorola Siemens and Phones 4U.

Healey said Customs strategy to tackle missing trader and carousel fraud was on track and beginning to achieve results.

Figures released by Customs indicate that for example between March and May of this year the value of consignments of mobile phones from the UK to the Netherlands fell from 300 million to just over 30 million.

Healey said the government was on track in tackling missing trader and carousel fraud and is beginning to achieve results.

At least 44 traders had ceased trading since Customs began issuing warning letters under the extended security powers from section 17 of the Finance Act he revealed.

Also Customs investigators are currently working on approximately 100 MTIC (Missing Trader Intra-Community fraud) cases worth around 2 billion. Repayments to known brokers have fallen from a peak of 600 million in the second quarter of 2002 to just 100 million in the same quarter this year.

I do appreciate the sensitivities of those of you trading in the sectors that are badly blighted by MTIC and the fears that you as legitimate businesses may be caught up in a system designed to target serial VAT abusers said Healey.

But Don Mavin director of the VAT Investigations Team at tax specialists WJB Chiltern said Healeys speech was just Customs blowing their own trumpet.

In reality all they have done is moved the problem away from the UK. I dont think they can pat themselves on the back at all.

Huge amounts of VAT have been evaded. The amounts are so high they were affecting the balance of payments. Their main (Cont P2) success was preventing businesses from trading and is the main reason why trade has gone down.

Everyone was afraid of being made liable for someone elses wrong doings. Before the Budget measures Customs were completely unable or capable of dealing with this problem Customs werent watching the bad guys so an awful lot of legitimate businesses are facing substantial demands for lost VAT.

These traders were providing Customs with so much information. Customs should have used their resources more effectively and collated the information to spot who the bad guys are and to warn everyone they went for the soft targets which in most cases were the exporters reclaiming the VAT said Mavin.

More than 4100 P800 owners have signed an online petition lambasting Sony Ericsson and demanding a free upgrade to the pen-based Symbian user interface UIQ 2.1 that runs on the P900.

The scale of anger against Sony Ericsson is clear from some of the comments of the petitioners. Petitioner Matt Glover said: I feel used and abused by Sony Ericssons lack of support for this phone.

Another called simply Tony said: I just dumped my P800 on eBay. Ill never buy another SonyEric (sic) again. I may be jumping the gun a little but SE should have made a decision by now and publicly stated that the upgrade is in development.

That it hasnt means we are either ignored by SE or that SE has a poor customer-services/communications department. Either way its a company I no longer have time for.

User Chris OConnor (Cont P2) said: My P800 is full of bugs. Im disgusted Sony Ericsson is releasing the P900 without either fixing the bugs or offering a cheap upgrade.

The petition was started by Michael Andreasen head of IT for a Scottish veterinary wholesaler. He claimed the P900 is simply the P800 with the new UIQ 2.1.

Many people who purchased a P800 thought they were purchasing more than just a basic phone. The price of the P800 was getting into laptop pricing he said.

We all thought we were buying something that would receive upgrades in firmware to get the most from our expensive state-of-the-art hardware. We all feel like testers for the P900 who paid through the nose for the privilege.

It feels like Sony Ericsson is trying to milk its high-end users for every penny it can get by making them upgrade expensive hardware to get software improvements. Before the P900 was released I and many other people expected that the UIQ on the P800 would be upgraded to 2.1 at some point in order to improve many of the poor areas of the P800.

Andreasen says he contacted Sony Ericsson through its support forums but received no reply.

The P800 has UIQ 2.0. This is the very first version of UIQ for any device and as such it is far from perfect. Sony Ericsson has implied that P800 users could expect major updates in many key areas. Other than some trivial patches the P800 has not had any update that could in anyway be described as major.

Many would argue that upgrades are part of technological life and that the same upgrade situation happens with computers cars and most other products.

Andreasen argues this case is different because Sony Ericsson published a document in which it stated that there would be continual updates for the P800.

In The P800 for Enterprise Usage Sony Ericsson wrote: Since the P800 is an open environment new solutions will continually be developed by both Sony Ericsson and third parties. In most cases such new solutions will work on the existing product range even when successors to the P800 have been shipped.

I know companies such as Nokia dont give major software upgrades to its smartphones Andreasen conceded. But Nokia hasnt marketed its devices as being upgradable in the same way Sony Ericsson did with the P800. Nor have I seen any similar document coming out of Nokia.

The P900 has almost identical hardware to the P800 apart from the 65000-colour screen he argues even down to poor battery life. He also pointed out that the P900 uses exactly the same Symbian OS (7.0).

In fact all the real improvements come from the UIQ 2.1 upgrade and not the hardware he said. If UIQ 2.1 was on the P800 it would be 95 per cent the same as the P900. Any P800 owner who wishes to get these software improvements has to ditch their perfectly good hardware and spend 600 to buy practically the same hardware again but in a new box. This is just unacceptable.

Sony Ericsson marketing director Peter Marsden said the manufacturer wont be offering the upgraded UIQ for the P800 because there is not enough memory to allow the new system to run.

The new UIQ demands more internal memory which the P900 has but the P800 doesnt. Trying to install it on the P800 would cause problems with content such as calender and contacts. Also the 2.1 was written for a 65000-colour screen which the P800 doesnt have.

We try and act responsibly to our customers where it is technically possible. But in this case it isnt. We feel the P800 is still a quality product and I feel sympathy for these users – but then technically superior products are always being launched whether it is mobile phones cars or computers.

The problem affects O2 pre-pay customers calling former O2 users who have since ported to another network as well as O2 pre-pay customers calling numbers recently ported on to the O2 network.

In both cases the billing system failed to recognise the change of network had taken place. So it (Cont P2) charged customers at old rates. At some times this was up to 18 times higher than the correct amount.

An O2 spokesperson said the mistake had not brought O2 any financial gain.

He claimed this was because certain pre-pay customers are receiving cheaper on-net calls while others are being charged for more expensive off-net calls.

This is a problem we have had for over a year which affects certain calls made from pre-pay phones on one of our pre-pay billing systems. While we are not making any money from the fault it is something that we are urgently trying to rectify added the spokesman.

O2 says that the fault only affected a small number of O2 customers. Work is being carried out on the billing system and the problem should be rectified in a matter of weeks.

The fault was uncovered by the Consumer Association but O2 says it has kept Oftel informed about the problem and of the technical steps it has been taking to rectify it.

Nokia launched a multi-million TV campaign in October comprising of three ads. Two of the ads feature a scene in Sighthill Glasgow – a grassy footpath – where Kurdish asylum seeker Firsat Dag was brutally murdered. A 26-year-old man Scott Burrell was jailed for life in December 2001 after being convicted of the offence.

A caption in the ad which promotes Nokias phone-cum-gaming console was branded insensitive for reading this is where I got a good beating with the murder scene in the background. (Cont P2)

Nokia said it pulled the adverts immediately after complaints from Mr Dags family and a local journalist.

We have apologised to the family and pulled the two advertisements Nokia spokesperson Mark Squires told Mobile News.

It was unfortunate the camera crew accidentally shot the background for the ad at the scene of this incident. We pulled the advertisements after a local journalist – who remembered the murder – notified us. We have not reused the offending ads by deleting the scene. The adverts were pulled completely.

He went on: If the camera had been pointed a few yards away this situation might not have arisen. We try to do research before filming but in urban areas it is becoming increasingly difficult to film locations that have not been the scene of a fight or incident.

The trial was halted last Monday (November 10) after the case was dropped by VAT commissioners.

Details of the offences were not available at the time of going to press.

In a Customs operation codenamed Entree four men had all charges against them dropped by Customs for undisclosed reasons.

The freed men were named as Clive Lettman (40) Peter William Nicholls (53) Gary Anthony Blurton (42) and Thomas John England (56).

A Customs spokesperson confirmed:

Proceedings in Operation Entree were stayed in the public interest.

The news comes just a few weeks after Customs lost a VAT trial in Leeds crown Court (Mobile News October 20) when five defendants successfully cited an earlier case relating to a company called Bond House when it was determined that VAT does not apply to carousel fraud.

However Customs claimed the Operation Entree case was halted for different reasons.

The spokesperson added:

Operation Entree was dropped for different reasons from Operation Dundee.

Operation Dundee fell apart due to the indictment and Customs trying to amend it.

Operation Entree never went that far. We cant go into detail for sensitive reasons.

In another current Customs VAT trial codenamed Expire Customs says the defendants are due for sentencing this Friday (November 21).

Nokia had been asked to mount an investigation into two handsets that burst into flames in Holland. Now a Sharp GX10 spontaneously burst into flames destroying the battery SIM card and much of the handset.

The phone belonged to Ealing electrician Steve Wing who had just recharged his phone in his car using an official Sharp charger.

Wing explained: After recharging my phone I went into a friends garden to do some work for him and placed the phone on a block of timber. Suddenly I heard this hissing noise coming from the phone. I turned to look at it and the back of the phone had gone red. There was smoke billowing out of it. I couldnt get any closer because of the smoke.

I left it in the sun but I cant believe that was the cause. I just consider myself lucky that I was outside when it happened and was not using it. It could have caught fire in my van while I was driving or in my house.

Wing called Sharp to complain. But after an hour of being told to call another number he gave up and called his service provider Singlepoint.

He says Singlepoint was no more helpful and actually tried to charge Wing 10 for a new handset. After he complained the Singlepoint waived the fee.

Wing is now using a Nokia 5100 and says he will not be returning to Sharp.

I tried to report the matter for an hour but I couldnt find anyone to talk to. Thats no way to treat a customer.

Nokias problem with exploding handsets happened when two phones caught fire in Holland. In each of these two cases Nokia claimed the problem was linked with third-party batteries. In this case however Wing is adamant he was using the correct Sharp battery that came with the handset.

Sharp senior product planner Matthew Tibbett said: This is the first time we have heard of any such problem. We havent had any reports of exploding batteries and we have used the same model in the GX10 GX10 and GX20 since launch. It could be that the battery is a non-Sharp battery. We would like to see the handset to carry out tests.

They are two of four SPs whose licences are understood to expire in March because they have not performed to their business plan.

Vodafone head of business sales Ken McGeorge said four SPs have been told they have until March to sell their customer bases or hand them over to Vodafone (Cont P2) though he declined to name the SPs.

The other two service providers are believed to be AAC Telecom and Telecom Plus.

DCI chief executive Roger Frye (ex-Talkland) said: Its business as usual while we continue our negotiations with Vodafone. I expect these will be concluded by the end of January. The SPs that have lost their Vodafone licences have already been told so Im hopeful well retain ours.

I admit we did not perform to the business plan we put in front of Vodafone. But as one of the newest SPs we concentrated on building services rather than customer base so its a bit premature to measure our performance. We have been developing a lot of contract-related services that are now ready for market.

Cable Direct managing director David Witham-Perkins claims his company is still in negotiations with Vodafone to retain its SP licence.

Both parties are currently reviewing the situation but we remain a Vodafone service provider while these discussions take place said Witham-Perkins.

Admittedly a lot of our business is landline telephony which all goes through Cable and Wireless. But we are putting together a package to bring these customers a mobile offering and capitalise on our one bill capability. Id like to think any decision made was a joint one between Vodafone and ourselves.

Telecom Plus chief executive Charles Wigoder would not confirm or deny having received confirmation of Vodafones decision to terminate. Paul Ellis of Bedford-based AAC Service also declined to comment.

Meanwhile O2 has terminated the contracts of nine service providers whose customer bases were too small to make their continued support a viable proposition. O2 declined to name the companies affected.

The companies concerned received letters before Christmas.

O2s remaining service providers have all had their contracts extended until the end of March as negotiations surrounding terms and conditions are finalised. It is expected that all will remain O2 SPs.

A spokesperson for the network told Mobile News: We will support channels that attract high-value customers and focus on earning revenues from value-added services and reducing customer churn.

The network described as inaccurate and contradictory a note by analyst Mark James at investment bank Nomura Securities.

In Hong Kong Hutchison chief Canning Fok expressed disbelief at Jamess predictions.

We are seeing good results said Fok. I dont understand this report. Why would we exit?.

Nomura reckoned Hutchison will accrue debts this year of $2.7 billion on its investment in 3.

James said:

We find it hard to see how H3G can ever achieve an economic return on capital and our valuation of the company is a negative HK$63 billion ($4.5 billion). Our Hutchison Whampoa estimates include an assumption that the company walks away from its 3G ventures by the end of 2006.

3 dismissed Nomuras forecast. A spokesperson said:

The report is one analysts estimates without any guidance from Hutchison. It is contradictory because it says Hutchison has staying power and will back its 3G investment yet that it will pull out by 2006. (cont P2)

The hard times were last year when we had problems with handset supplies. Weve now got good handsets selling well. If Hutchison was going to pull out it would have done so last year not now.

People are changing their views more and more. The bad press is getting less and less.

Martin Garner director of research programmes at London-based analyst Ovum forecasts a period of consolidation across the whole industry but regards Nomuras predictions as radical and controversial.

We do expect to see consolidation within the industry said Garner.

The Nomura report is fine in itself but it is quite a controversial view. Hutchison stepping out of 3? No we cant see that happening.

All the signs are that Hutchison is going to have a tough time with 3 but it wont pull out. We wouldnt predict that at this stage.

Hutchison is expected to reveal more detail about its 3G business at the groups annual general meeting on May 20.

The company last week revealed its latest handset this time from Korean supplier LG (see pic below).

Were phoning our Orange customers and offering them a switch to 3 three months before their contracts are up said Mark Whitaker of Findaphone in Accrington.

Were offering to buy them out of their Orange contract. Even if there is a lower margin were still making money and were retaining customers.

Whitaker said each of his Orange customers had told him that Orange had already contacted them to offer them a free upgrade before their 12-month contract was up.

It shows how scared Orange is of 3 said Whitaker.

Each of my customers has been tapped by Orange two months before their contract was up. If Orange says otherwise its denying what is obvious to everyone else in the industry. Our customers have no reason to lie.

Whitakers 3 connections have increased six-fold over the past three months.

Customers show us offers advertised by Orange in newspapers and on the web. We can either tell them to take the offer or we sell them 3.

And if Orange thinks were going to let customers go they should think again. Either we let it happen or we do something about it.

Ellis Dunning of Talksense in Borehamwood added:

I know what Orange is doing and I would consider taking similar action (to Findaphone).

This problem has to be (Cont P2) addressed. Independent dealers dont have a voice. I would consider offering customers 3 before Orange gets to them.

Adrian Foot of the Phone Shop in Welling agrees that dealers need to take action.

Our own customer feedback says that most of our Orange customers have been approached by Orange within 12 months. Orange is not playing the game he said.

Dealers have to take measures. I would churn a customer three months early if I thought I could keep their business for another year.

Jonny Marris of M-Tech Mobiles in Hemel Hempstead said:

Calling customers before their contract expires is drastic and there would be a lot of admin. But its worth looking at.

Orange commissions are so poor on upgrades that we are changing customers to 3 where possible.

Gary Bridger of Airwaves Communications in Yeovil said he churned a 24000 Orange business contract to Vodafone last month because of Oranges treatment of the independent dealer channel.

Bridger said that Whitakers actions were understandable if drastic.

If you are an Orange direct dealer or an Orange Business Specialist you are protected. But Orange shows no commitment to independent dealers that go through an Orange distributor.

It makes the kind of action people are taking very understandable though its perhaps a bit dramatic. It was on the cards.

Independent dealers have to be more proactive with their Orange customer base. Churn would be reduced if Orange introduced ongoing revenue.

Orange responded to the dealers comments with a statement that said:

Orange values its customer base and we are always keen to ensure that we retain our high-value customers.

Last week Virgin Mobile made the announcement that it would sell 98 million shares to institutions. A further 14.7 million shares could be listed if the demand is high. This would mean between 37 and 43 per cent of its total shares will be available. Virgin Mobile is hoping to price the shares at between 235p and 285p to institutional investors in the UK and abroad. This would value it as highly as 1.2bn.

Employees will receive free shares with an average value of 750 depending on length of employment.

There is no reason why it shouldnt be successful said Paolo Pescatore senior analyst at IDC.

The mobile market has been apprehensive about flotations until now but this could stimulate the market for more. It is a good time to seek an initial public offering. Virgin Mobile has been successful with its customer service revenue targets and the services it has pioneered. It shows the success you can have if you have a good brand.

As the shareholder base changes there will be different opinions on how to move forward. Issues will arise but it could (Cont P2) mean that Virgin brings services to market more quickly than it has in the past. It may also mean that Virgin looks to other European countries to expand.

Ovum wireless analyst Carrie Palsey said Virgin Mobile is on the verge of establishing itself as a proper MVNO by acquiring its own mobile switching centre.

This means it will be able to collect its own termination revenues for the first time said Palsey.

Virgin Mobile however denied that it was about to acquire its own switching centre.

Virgin chief executive Tom Alexander who reportedly stands to make 10 million from the float said: I do have a percentage of the original equity of the business and Ill find out how much I make from it in the next few weeks.