Staff Reporter

The letter attributed to development manager Helen Keys said:

Because theres an extremely high demand for mobile numbers but only a limited number to go round if you dont start using yours again soon well be reluctantly obliged to disconnect it to make room for new customers.

One of the recipients complained to a Sunday newspaper. Vodafone apologised and admitted that the letter was badly written and quite aggressive.

There have been a number of senior meetings at Vodafone as the network tries to get to the bottom of the incident.

It is understood that the letter would have had to have passed through a number of hands before it was finally given clearance to be sent.

Vodafone said no one had been dismissed and no disciplinary action had been taken.

Walker confirmed that while a local Customs investigator might want to prosecute a case the decision would have to go though an independent pre-approvals body before companies were fined or joint and several liability measures were applied.

Walker stressed that Customs is not after honest businesses that can demonstrate they have done all they can to avoid carousel fraud.

He claimed that traders have no reason to worry about checking beyond their initial supplier and customer as long as they ask the right questions before doing a deal.

If an honest and legitimate business does everything it can to avoid being caught up and we are satisfied it has made all reasonable checks we are not going to apply joint and several liability.

But the threat of being hit for liability has already driven several traders out of the business. This is having a knock-on effect up and down the supply chain.

MoCo Cell Link boss Maurice Whelan said: Handset trading has come to a shuddering halt. I am petrified of buying from anyone other than the networks or big distributors. It is even a big risk buying stock from respected traders.

Keith Bennett of trading company Furzfield added:

Customs owes us a large amount from March that we havent seen. There is no point staying in the industry. Customs has its talons out and it is looking for some people to make an example of.

A despairing Stuart Wright of Phone Trade said: We arent trading anymore. There is no way we can. With the joint and several liability ruling there is absolutely no way that I can continue trading.

The only people I can truly know if they are legit are my customers and my direct suppliers. Outside of that I just havent a clue.

(See full story P18)

A disgruntled former Orange store assistant is taking the network to court over wages he alleges are owed to him.

David Polson 25 worked in Oranges retail store in Yeovil for seven months in 2002 as a full-time assistant.

During this time he claims the network failed to provide him with the free Nokia handset it promised him failed to increase his wages following the successful completion of his training and failed to pay him his holiday entitlement when he left.

I received no support from my store manager or regional manager when I told them of my problems he said.

They were more interested with procedures and as long as the handsets were correctly lined up they thought they were doing their jobs.

I was told that someone was sorting it out but for my last month I found myself spending more time on the phone trying to sort out my wages than actually helping customers. This meant I was losing the chance to earn commission.

Polson who now works as a graphic designer with a business consultancy also says he incurred bank charges because of the failure of the network to pay his wages accurately. He is also demanding Orange pay the charges.

The case has been transferred to Yeovil County Court.

At time of going to press Orange had not commented on the case.

The FTI warned the Government to defer the legislation until it could be approved by the European Court of Justice. A spokesman for the Chancellors office told Mobile News:

The clauses 17 and 18 are compatible with EC VAT law and the Human Rights Act. They are a proportionate response to companies undermining the VAT system. There are safeguards to ensure legitimate businesses are protected. There is an appeals procedure.

FTI chairman Mark Cook said the FTI would now serve an injunction against the Government to prevent the joint and several liability clause of the Finance Bill becoming enactable.

The Governments approach is misconceived. Our counsel believes the new VAT directives are not in line with European law.

The proposed new legislation now awaits a date to become law without any amendments. A House of Lords Select Committee report has recommended Customs officers with suspicions about a trader should first take the case to a VAT Tribunal to decide culpability. Customs would have to prove traders were guilty of fraud before issuing assessments.

The Finance Bill has passed through all Parliamentary stages. A date for the bill to be granted Royal Assent is to be set before Parliament goes to recess. No amendments are planned.

A list which is in Mobile News possession identifies several well-known companies writes Paul Tweeddale.

At the time of going to press Customs and Excise had not returned our calls to verify the lists authenticity.

Many traders were furious that their name appeared.

It is absolutely diabolical that some list can come from Customs or anyone else insinuating that the companies listed are involved in VAT fraud. Especially when its legitimate people like us who appear on it fumed one trader.

We havent heard from Customs and we havent had a visit. I realise they have to stem the tide of VAT fraud. But they have put a lot of legitimate businesses like ourselves out of business because of the rules they have introduced. And now to complicate things with an unofficial list is just ridiculous.

The international sales and purchasing manager of another company named denied any wrongdoing and said he was keen to find out why his company has been linked to carousel fraud in this way.

We have no idea why were are on the list and we are very frustrated. We are trying to see how we are involved. There are so many names on the list that it is as if the whole industry is involved.

We have been in the mobile market for many years and we have never had any enquiries from Customs and Excise before.

We will be speaking to our suppliers to see what is going on. This stuff has almost stopped our business.

The sooner we can get rid of the bad companies and the sooner we can get back to normal the better said the trader.

One trader who has been questioned by VAT investigators said:

We dont know why our name appears on the list. We stopped trading after the new legislation came into effect in March.

When Customs turned up early in the morning they didnt tell us which deals they were investigating or when.

They just asked us if we knew any of the companies.We have done nothing wrong. All we are doing is helping Customs with their enquiries. Just because one company does one thing doesnt mean all of us should be tarred with the same brush.

All our suppliers are cleared with Customs and Excise before we deal with them and at the end of every month we send the details of any new company weve traded with back to Customs. (Cont p2)

Other dealers reacted angrily to the news they were on the list

One trader raged: It is bad enough having people gossiping about who is on the list.

If our company name appears in Mobile News as being on the list it could end our business.

The Customs hit list follows a massive raid by 350 Customs and Excise officers on July 2. More than 70 businesses and homes in the UK and Spain were raided.

In England searches and arrests were made in the counties of Buckinghamshire Cheshire Essex Lancashire Middlesex Staffordshire and Surrey and in Coventry Liverpool London Manchester Northampton Reading Sheffield Slough and Wolverhampton.

Raids also took place in Wales in Cardiff and Wrexham. About 350 Customs officers were involved helped by police in Britain and Spain.

Not even The Carphone Warehouse escaped the extensive dragnet. Customs officers arrived unannounced at the companys Acton headquarters and quizzed distribution head Tony Jeffrey and another member of the trading team under caution before leaving with a quantity of files.

We havent heard anything further. We think they wanted to speak to our guys because they want information about some of the other people they are investigating said Carphone Warehouse chief executive Charles Dunstone.

Ironically The Carphone Warehouse ceased much of its trading earlier this year. The company still deals in traded-in stock and sources kit for its stores from the Far East but has stopped buying equipment in the UK. Dunstone says the pull-back will cost the company up to 4 million a year.

The networks (with the exception of O2) together blew 10 million in legal and consultancy fees to challenge a ruling by Oftel and the Competition Commission that they had to reduce their termination charges.

Thats the estimate of outgoing Oftel director general David Edmonds who gave an exclusive interview with Mobile News following the High Courts decision to dismiss the networks legal challenge.

But Edmonds insists he is not gloating over Oftels victory

Im not triumphant but I am pleased that that the work we carried out over the past two years has been vindicated.

I am delighted the High Court ruled that Oftel and the Competition Commission had acted properly he said.

I am sorry it came to this. I thought the proposals we made two years ago were fair to the industry and fair to consumers. At the time the market was suffering considerable turbulence.

I thought RPI minus 11 per cent was fair to everybody. The Competition Commission argued that I had been too fair and toughened up the price controls.

Ive heard the networks have spent 10 million in legal and consultancy fees. The diversion of management effort must have been significant. The networks now are slightly worse off than they might have been if theyd accepted my original proposals.

I am disappointed that the industry didnt see the sense of what I am proposing although I am pleased that O2 disassociated itself from the appeal. That was a sensible decision.

In regulation you come to the end of one cycle and you get straight on with the next.

Im meeting with Vodafone in a couple of days. The question of termination charges will come up but Im far more interested in the way it is planning to enter the world of 3G.

Regulators cant be vindictive or triumphalist. They have to get on with the task of regulation.

Convergent Communications chief executive Graham Darnell and the companys founder John Weatherill have blamed the distributor/service providers financial crisis on the previous regime under ex-managing director Tony Farmer.

Said Weatherill:

I feel a sense of personal loss. I left a sound company with excellent prospects. All that promise has been turned to dust. As I left it the company was heading towards a very healthy profit for the year.

There was no overdraft and 16 million in the bank from the rights issue. They managed to turn that into a loss by selling all the shops off for nothing and writing 6.5 million off the balance sheet. Incredible.

Farmer now a partner in a North Yorkshire accountancy firm seems to have few regrets. He told Mobile News:

Ive moved on. Im out of the mobile phone industry and getting on with the profession of accountancy. I have no contact with the company. I hear tittle tattle from time to time. But I take that with a pinch of salt. I cant comment on the situation today or the suspension of Convergent shares.

Convergents shares have been suspended pending a possible sale of some or all the assets. Current CEO Graham Darnell said bids were being examined.

We will be inviting bidders in to talk to Convergent management. Some will be invited to commence due diligence. The process could take up to three months.

Darnell agreed the company had under-performed.

We have had good relationships with our dealers and suppliers. These have continued despite the present situation.

The company has not been profitable. It made expensive acquisitions that didnt make the returns expected of them.

The beleaguered distributor/service provider is rumoured to owe 8 million to the Royal Bank of Scotland. It is unlikely that the company will receive a high bid. Average ARPU among Convergents 19000 subscribers is said to be only 39 per month per subscriber.

(see full story P28)

His access to analysts and City sources takes our coverage to a new level said Mobile News editor Ian White. (see P14)

3 Ireland commercial director Stephen Pilkington told Mobile News that this would increase at a rapid rate.

When users leave 3G areas coverage will hand over to roaming partner Vodafone giving 99.5 percent population coverage for voice and text which Pilkington claims put some of its rivals in the shade.

Launch handsets are the NEC 338 and Motorola V975 which will only be available online and the Motorola E1000 LG U8138 and Nokia 6680 – but Pilkington says more will be added.

From launch our presence will be in 50-plus outlets which may not sound a lot but is a reasonable start when you consider that Ireland has a population of four million. We are very optimistic about our prospects. The Irish market has a lot of young technology-savvy people who will want to try out 3G services.

Prices in Ireland have always been very high and service very low. We hope to set a new industry benchmark with customer-focused initiatives including a handset replacement programme that aims to replace faulty handsets within hours of the reported problem and a 14-day money back guarantee – something that is standard in the UK but has not be available in Ireland until now.

Phone Direct had curtailed its handset trading since Customs and Excise withheld a 2.4 million VAT refund last year pending a VAT tribunal hearing in October (Mobile News June 1).

The share placing was approved by TTG shareholders at an AGM on July 13. Phone Direct began trading again on July 19.

I never had any doubt that the placing would be a success said Andy Smith TTG Group director of mobile distribution and CEO of TTG subsidiary Anglia Telecom.

The whole meeting was over in 15 minutes. There is not currently a lot of confidence in telecoms so to raise 6 million shows the confidence that institutions have in the group.

Apart from replenishing Phone Directs working capital the funds will be used to open distribution centres for the groups new distribution arm TTG Mobile in Amsterdam and Brussels as well as other markets.

TTG Mobile will be based in the World Trade Center in Amsterdam and recruitment has already begun for various financial operational and marketing positions. TTG said that it would launch a campaign to recruit dealers in the Netherlands in August with a 2004 target of 50.

We have already signed deals with Vodafone and KPN to distribute in Holland. We will look to Belgium next and then possibly Spain. The idea is to replicate the Anglia Telecom business model that exists in the UK in other markets said Smith.

Smith said that TTG will continue to wholesale handsets as long as there is a market and a margin.

Graham Pollard CEO of TTG Netherlands and Belgium said: The introduction of this division opens up a number of new channels to market that will enable us to continue expanding our dealer network.

Group CEO Michael Hanna said:

We promised shareholders we would get back into bulk trading at the earliest possible opportunity and at increased levels.

He is perfect for this type of job. Hes keen to look at new ways to sell the product.

Red Letter Days was a struggling company run by Joness co-star on the Dragons Den TV series Rachel Elnaugh. The company went into administration and was snapped up by Jones who also now has interests in publishing (see White Lines page 52).

Henry told Orange of his decision to quit on Monday this week. A replacement at Orange has not been announced but it is believed it will be a French national.

A source close to Orange said that Henrys departure had been on the cards for some time. Henry was being pushed out as a result of poor sales performance and subsequent loss of market share.

Three years ago Orange was regarded as number one – now it is struggling to maintain third position. Without some sort of positive response it is likely to move to number four given the positive performance of 3 in recent months.

The source added: Orange has lost its way and needs to use this opportunity to sort itself out – Vodafone was dusted off the number one spot but it went away got its house in order and regained that spot. Orange and whoever it brings in to replace Henry need to do the same.

Paul Leonard managing director of Orange Business Specialist Sprint Communications said the news of Henrys departure came as no surprise. Im not overly shocked. I think Stuart had done as much as he could in that area in terms of promoting the channel.

He is a strong guy who needs a challenge and hell certainly get that in his new role. His contacts in the sporting world especially in rugby make this a marriage made in heaven for him.

Microline managing director Jas Singh who has been an Orange dealer since the network launched was stunned by the news. Im shocked he said. Stuart has been really good for the industry and good to dealers.

Its quite worrying who he will be replaced by. If its someone from France Telecom we could be in trouble. The French do business differently and the threat of possible changes to the industry in the run-up to Christmas will make a lot of dealers nervous.

He added: I would prefer to see someone from the UK – someone who knows the industry – take over.

The Motorola device still dubbed ROKR at the time of going to press will be carried at launch by O2 in the UK T-Mobile in Germany and Cingular Wireless in the USA. Motorola reportedly received FCC approval for the device last week.

The launch took place on Wednesday but at time of going to press Motorola O2 and Apple would not disclose details of the launch.

O2 was being coy that it will carry the handset but a spokesperson said: Our music strategy is to provide compelling music propositions that our customers want and we are looking at a number of options to ensure that we deliver against this.

The ROKR which is rumoured to resemble a white version of the Motorola E398 is expected to be released to coincide with the busy Christmas market.

It is anticipated that it will be the first phone to ship with Apples iTunes software and will come in two versions one with 256MB of memory and one with 512MB.

The new phone will be capable of storing about 70 and 140 songs respectively. Users will not only be able to plug the phone into their computer to tap their iTunes Music Library for tunes but will also have the ability of buying songs on the fly over Cingulars network.