Staff Reporter

In his statement announcing results for last year Li said although committed to develop manufacture and deliver a significantly-enhanced second generation of 3G handsets for sale during the second quarter suppliers only made limited deliveries seriously impairing the Groups ability to increase its customer base in the fourth quarter of 2003.

This issue has been resolved early this year. The Groups suppliers commenced delivery on new handset models in commercial quantities as a result of which sales have progressed very well.

Currently the Group has over 1038000 customers worldwide with approximately 361000 in the UK 453000 in Italy and 36500 in Hong Kong.

Li also revealed that 3 has added 151000 UK customers since December 12 2003 giving it a current total customer base of 361000

He said that 3 has maintained a high monthly ARPU of 45 and that 3 in the UK now has over 75 per cent population coverage for video mobile services and 99 per cent per for voice and text 3 products and services are now available in over 3200 shops across the UK

But playing the 3G game has cost Li and Hutchison Whampoa dearly so far. Last year it made a net loss of 130 million on its 3G operations around the world from turnover of 142 million.

The technology network infrastructure and distribution channels are all firmly developed and the Group is now focusing on sales and operations. The number of 3G subscribers is now expected to grow satisfactorily Li concluded.

Yes Telecom managing director Keith Curran declined to disclose the purchase price or subscriber numbers but said the move was an excellent fit moving forward for both companies and would allow Yes Telecom to support and develop voice customers.

We are both service providers so we knew each other well. The deal started as a general conversation about strategy. It became obvious there were advantages of working together said Curran.

The deal allows us to continue to acquire and support high-quality subscribers. Thales can continue in the data market. (Cont P2)

Curran said that the deal would not affect Yes Telecoms primary goal of working with its dealer business partners.

He said the acquisition would not affect the management structure of Yes Telecom and more customer service staff would be hired to handle the increased voice base.

I have hired two new people and will take on several more over the next few weeks said Curran.

Yes and Thales have been talking for some time about the sale of the voice database.

Chessington-based Thales used to be run by Edward Belgeonne who spun the business off from the old European Telecom when it was known as Orchid.

Belgeonne left Thales last September and was replaced by Frenchman Jean-Louis Moraud.

The company specialises in the development and marketing of mobile data applications and vehicle telematics such as location-based services. It intends to confine itself to this area from now on.

Perfect Fit for Business price plans which will be available from today (Monday) offer business users options such as free calls to company mobiles free calls back to office landlines shared inclusive minutes and simple flat-rate call charges.

In addition businesses now have the option to make free calls between company mobiles on the same price plan while companies on 24-month Sharetime or Company Caller contracts will get free mobile-to-office calls to a maximum of five company-owned landlines (PSTN numbers). This will provide access to up to 250 direct dial numbers.

Vodafone senior business propositions manager Ben Sefton told Mobile News that the new tariffs will suit companies from one-man bands right up to those with up to 250 employees.

The small business is unique. It is very different from larger corporations and certainly different from consumers. Small firms (Cont P2) represent a key part of our customer base and we are trying to give them better value.

Sefton admits that previous tariffs had left small businesses out in the cold. In January 2002 Vodafone launched cheap calls between companies and in May last year it launched Perfect Fit which was primarily a consumer proposition.

We have spent the past year doing a lot of research to find out the needs of this sector and create tariffs that meet those needs.

Perfect Fit for Business is made up of four tariffs and their variants.

The first Sharetime 750 1250 2500 5000 and 8000 gives customers inclusive minutes and free calls across a group of mobiles.

Added benefits include up to 60 per cent savings on international calls and the ability to carry over unused minutes to the next month. Customers will also get free calls to office landlines when taking out a two-year contract.

Company Caller is a simple line rental with no inclusive minutes that provides free calls between company mobiles on the same price plan. It also includes free calls to office landlines if a business takes out a two-year contract.

Anytime 200 400 and 1000 allow businesses to choose the minutes they need for each individual mobile.

The plans include calls to any network at any time and the ability to carry over unused minutes to the next month. With Anytime 1000 customers will also save up to 60 per cent with free International Call Saver.

The fourth is Business Caller – a price plan with basic line rental and no inclusive minutes.

Sefton went on: Today with many people working out of the office or off-site it is vital to be able to communicate regularly with colleagues whenever and wherever they happen to be working. We believe that businesses are typically making around 25 per cent to 40 per cent of their phone calls to their colleagues or to the office.

All the new plans will offer the ability to change within Perfect Fit for Business price plans after the first four months free e-mail bill management tools on request at least 50 per cent savings available on data bundles and a 10 per cent saving on the monthly line rental charge by taking out a two-year contract.

We understand that smaller businesses must adapt towards a more flexible working environment to enable them to compete with larger organisations Sefton concluded. The Perfect Fit for Business price plans are at the heart of our continuing commitment to deliver the best possible value to SMEs.

PNC originally agreed to pay the former KJC founders an initial 30 million for the chain of KJC mobile phone shops in April 2000 giving them 15 million each. This 15 million was made up of 7.5 million cash and 2.9 million shares which were worth a total of 7.5 million.

Ridge and Case were due a further deferred payment based on KJC profits from for the year to July 10 2001. The deferred payment limited to 32.5 million was calculated as 10 times KJC profits less 30000000. (Cont P2)

Ridge and Case claim PNC failed to produce a statement of profits for KJC to determine the outstanding claim.

They estimate KJC made 4.3 million profit. If true this would entitle them to 13 million (based on the shares being an agreed 2.80 each). But PNC says KJC did not make more than 3 million profit because of irrecoverable commission payments. PNC wrote to Ridge and Case to say restated profits would reduce to under 3 million Therefore the deferred consideration falls to nil.

Case and Ridge sent accountants to PNCs auditors RSM Robson Rhodes who said they only had limited information and could not guarantee the figures could verify their claim.

Case and Ridge then demanded full access to PNCs accounts. Ridge said PNC failed to provide this information and is in breach of contract. The figure stands at around 36.5 million plus interest of 7000 per day.

PNC chief executive Ian Gray said

I agree the company should have produced a statement of profits back in July 2001. The responsibility for that was with Darren Ridge who was chief executive at the time. As a result we are petitioning for them to become co-defendants with us in this action said Gray.

Ridge replied: I was precluded from involvement by the firms auditors. It would have been akin to letting me write out a blank cheque. There was a clear conflict of interests. I was not allowed to produce those figures.

Gray maintains that PNC wont lose even if the courts rule in Case and Ridges favour.

We can pay them in shares. The value of those shares is now 5p each. We would owe them thousands rather than millions.

As co-defendants they would have to pay part costs. They wouldnt be left with much even if they won concluded Gray.

Sajid Mustafa 32 of Thornton Heath south London was found by police hiding in an attic a week after a spate of arrests that saw three other men arrested for similar offences (Mobile News October 20) initial arrests.

His arrest was part of Wandsworth polices Operation Nemesis campaign which targets dealers who reprogram stolen mobile phones. According to detective inspector Dave Manning head of Operation Nemesis mobile phones are stolen in 50 per cent of street crime reported in the Greater London area

All four men now face charges of either conspiring to reprogram mobile phones or handling stolen goods. Previous cases involving the reprogramming of mobile phones were sent to a Magistrates Court. But this case is set to go before the Crown Court.

The men are being charged under The Mobile Telephones (Reprogramming Act) 2002 which came into force a year ago. Under the act it is illegal to reprogram a mobile phone without the manufacturers permission

Operation Nemesis began in September as part of the Metropolitan Polices campaign to reduce street crime.

(see full story P16).

The payment has been withheld because Customs said Bond House had been involved (albeit unknowingly) in a supply chain where carousel fraud had taken place (Mobile News May 6).

The case set an important precedent for traders of computer chips and mobile phones. It gave Customs powers to withhold VAT refunds on purchased goods if a carousel or missing trader fraud was found to have taken place.

Bond Houses legal advisers Baker & McKenzie claimed (Cont P2) Customs action contravenes European VAT laws.

The law firm confirmed it has advised Bond House to appeal against the decision.

Baker & McKenzie solicitor Hassan Khan told Mobile News:

Bond Houses legal advisors remain confident that Customs & Excises argument of non-economic activity remains without authority or precedent in European law and is in clear breach of fundamental EU VAT law principles.

Khan also scotched rumours that Bond House was about to go into receivership or liquidation as a result of Customs continuing to withhold VAT.

I can deny rumours that Bond House is in liquidation he said.

Chief executive Graham Darnell who replaced former chief executive Tony Farmer two months ago had been given three months to review the business.

But a trading statement issued on Thursday stated:

The company has been considering its position in its market for some time and has initiated discussions with a number of parties with regard to the sale of Convergent Telecom. Several bids have been received. The board is of the opinion that there is a material uncertainty over the likely value achievable by the sale of Convergent Telecom and that the sale process may leave no real value for shareholders.

Darnell said he was considering a number of options to be presented to the shareholders at (Cont P2) the end of the month.

He went on: It is inevitable that we have had to undergo some structural change but only a half a dozen staff have been affected.

We enjoyed a cash injection in selling off Convergent Systems but that will only go so far.

The company has been in a difficult position for some time now but we intend to keep the business trading.

There have been offers for parts of the business but we have not accepted any of these.

We have no plans at this stage to sell off our service provider customer base because it remains a core part of the business.

Convergent posted a profits warning on April 15 admitting its distribution business had not recovered from the failure of a major customer last year which lost the company around 1 million. The failure occurred in suspicious circumstances with police investigating one of Convergents former dealers who is alleged to have connected large volumes of handsets but suffered high levels of early disconnections.

Convergent has around 20000 subscribers on the Vodafone and O2 networks. The company sold its fixed-line business Convergent Systems for 3 million in April.

A combined appeal by two traders Fulcrum and Optigen to demand that Customs re-pay them 23 million in VAT failed when a tribunal chairman backed Customs argument that companies may not re-claim VAT on goods purchased if the goods were part of a carousel fraud.

The tribunal chairman Dr John F Avery Jones ruled Customs was right to withhold Fulcrums and Optigens VAT refunds. He said certain transactions carried out by the two firms had formed part of a missing trader fraud even though they have not been implicated of any wrong-doing.

Customs last year disallowed some of their VAT refund claims.

The two companies appealed against Customs decision on the basis of the law that they were innocent until proven guilty.

The two trading companies challenged Customs policy to withhold VAT refunds where a fraud has taken place elsewhere in the supply chain.

The tribunal accepted that Optigen and Fulcrum did not know that any of their transactions were part of a carousel fraud but their appeal was still rejected on a point of law.

Dr Jones said he had found the case difficult. He had come to an unexpected conclusion and had changed his mind several times before reaching a final decision.

My conclusion is that the commissioners are right in saying the appellants transactions are outside the scope of VAT as not being economic activities. There is no principle of European VAT law that prevents that result he ruled.

Optigen and Fulcrum were given leave to appeal but Fulcrum went into voluntary liquidation earlier this year and would not comment on whether it would appeal. Sources close to the company have hinted it will do so.

Tax specialist firm WJB Chiltern says the decision strengthens Customs powers following its earlier victory against Bond House (Cont P2) (Mobile News May 19).

WJB Chiltern VAT specialist and former Customs investigator Don Mavin said:

This decision reinforces the Bond House case. The difference this time was that the case was not clouded by any of the facts.

This was just a straightforward legal argument. It means that Customs doesnt have to find you guilty of any wrongdoing to withhold input tax.

Customs can withhold input tax as long as there has been a missing trader fraud. It gives Customs a tremendous amount of power.

Around 400 dealers and traders met in Manchester last month to form an association to try and challenge the latest VAT anti-fraud regime. Common consent is that the EU court will regard the measures as unfair in two years.

Jayne Harper a regional sales manager at the operators Northampton offices was accused of forging invoices for hospitality events at various times last year.

Harpers deception was discovered in July 2002 and after a lengthy investigation she was dismissed. Police then charged her with 15 charges of fraud on November 18.

Harper appeared at Northampton Magistrates Court earlier this year and pleaded guilty to all 15 charges.

Last week she returned to court for sentencing where she received the four-and-a-half-year term.

The sentencing was a satisfactory outcome and illustrates that we take the issue of fraud very seriously said an O2 spokesperson.

This was a sophisticated fraud and we co-operated fully with the police to enable them to bring about a successful prosecution. This followed a thorough internal investigation to gather the necessary evidence for the trial.

Such fraud is extremely rare and we have a range of processes in place to ensure this is the case.

Since this case arose however we have conducted a thorough review of our existing processes and introduced further fraud prevention measures.

The company cannot yet be named for legal reasons.

Trading standards officers seized counterfeit Nokia mobile phone batteries chargers and housings after being tipped off by private investigation agency Intecap which is employed by Nokia to track down and prosecute counterfeiters.

The raid described by trading standards officers as one of the first of its kind involving mobile phone accessories may well be one of the first of many as Nokia battles to put the counterfeiters out of business.

Nokia says it is doing all it can to protect consumers and the trade from counterfeit goods which often turn out to be dangerous to consumers.

Nokia spokesperson Mark Squires said:

We acted after receiving numerous complaints from the trade. These were pure counterfeit goods. Some of the products are potentially (Cont P2) dangerous to consumers. These products are bad for consumers and the trade. Some of the chargers and batteries we have seen can be hazardous because they are not built and tested to UK and European standards.

Nokias legal advisers London law firm Willoughby & Partners said most of the seized goods have been positively identified as being counterfeit. The law firm added that trading standards might be in a position to prosecute the Nottingham wholesaler within a few months. Willoughbys Jeremy Newman told Mobile News:

We have been able to formally examine the samples and confirm that the majority of them are counterfeit.

Counterfeit mobile phone accessories is a growing problem according to trading standards officers who claim some 25000 counterfeit mobile accessories were seized in the past two months alone. Newman said Nokia would not deal lightly with companies that distribute unsafe counterfeit goods.

We have a zero tolerance approach to companies that distribute products that have the potential to cause injury such as batteries and chargers he added.

Trading standards officers in Nottingham were pleased with the raid and remain confident of prosecuting the company involved. Nottingham Trading Standards team leader Steve Riggot said:

Once we have confirmed the goods are counterfeit we will have evidence to allow us to interview the company over the alleged offences.

Riggot said the maximum penalty for selling counterfeit goods under the trademark acts of 1994 is 10 years imprisonment.

He added that distributors and retailers along the supply chain could face similar penalties if caught.

Anybody selling items knowingly or unknowingly could face a similar visit from trading standards and face the same repercussions. We want to send out a message that anyone distributing or selling counterfeit goods is committing serious criminal offences.

This is the first time we have seized counterfeit mobile phone accessories. It wont be the last. Mobile phone accessories is a growing market. We will be seeing more raids and prosecutions warned Riggott.

Nokia investigation firm Intecap warned retailers to steer clear of cheap mobile accessories. Howard Cottrell the MD of Intecaps London office told Mobile News:

We were alerted to the presence of these goods by their very low market price. We purchased some test samples analysed them and then contacted trading standards once we had enough evidence to prove they were counterfeit. The best way to avoid counterfeit goods is to buy direct from manufacturers and their authorised agents.