BTCellnet Security BT UK Investigations and the National Crime Squad mounted a series of operations in the Leeds and Loughborough areas against suspected manufacturers and suppliers of re-chipped BTCellnet pre-pay phones.

Ten warrants were served and premises searched. Nine arrests were made. Up to 30 BT and BTCellnet security personnel and twice as many police officers were involved (from West Yorkshire and Leicester police forces along with neighbouring police forces) as well as representatives from the FCS Crime Prevention Scheme and Trading Standards officials.

Items recovered showed that the perpetrators were involved in other counterfeit fraud. A sizeable sum of cash re-chipped handsets and other counterfeit goods including clothing digital set top boxes CDs and CD ROMs were seized.

Before this operation had taken place 19 people had already been arrested in half a dozen operations around the country. Whilst BTCellnet believes that the key perpetrators of the pre-pay re-chipping fraud have now been caught it is carrying out further security operations over the coming weeks.

These criminal offences (including simple possession of a re-chipped handset) carry a maximum sentence of five years imprisonment under section 42 of the Telecoms Act. With the evidence gathered we are confident that prosecutions will be successful said a BTCellnet spokesperson.

The three robbers were armed with baseball bats. The Carphone Warehouse staff were shaken but otherwise unhurt.

As soon as the gang burst in the staff hit panic alarm buttons and took shelter in a back room along with several customers.

Administrative receivers from KPMG were appointed late on Monday 22 November 1999 to take over the company which trades through the 39 retail outlets in London and the South East Midlands and North of England areas.

TCL had about 300 dealers connected mainly to Phones 4U. There have been rumours that TCL had been hit by some dealer fraud and tight margins on pre-pay. Some dealers had allegedly been putting in invoices for commissions for pre-pay rather than contract business.

Earlier this month TCL had paid off five dealer sales managers in a streamlining process (Mobile News November 15).

Telephone Communications Limited was established in 1984 and had a turnover of 21 million in the year to June 1999. The company employed 130 people in total including head office staff.

Joint Administrative Receiver John Dare said:

As administrative receivers we always try to restrict job losses to a minimum. All the outlets have closed hopefully temporarily while we seek a purchaser for the retail business. We are looking to sell the various parts of the business quickly to maximise returns to creditors. The retail operations are likely to be the main centre of attention for potential purchasers.

The company was closed down suddenly at 5pm on November 22. According to a source close to the company staff were told to collect their belongings and were walked off the premises. The locks were apparently changed in 20 minutes.

Directors Tony Lane John McLuskie Terry Cork and Rob Musk were said to be crushed by the banks decision.

The directors had apparently fought a last-ditch battle with the bank on the preceding Friday to keep the company alive.

No-one blames the directors. Everyone was very disappointed because they had all been working extremely hard. Retail connected something like a thousand new customers last week and the direct call centre was starting to get busier. Things seemed to be on the up. Morale had been good despite the redundancies of a few weeks ago. So the closure has come as a complete shock said the trade source.

Norths departure comes two weeks after Dextras managing director Richard Slee left the company under circumstances believed to be less than amicable (Mobile News May 3). North is believed to have returned to the computer industry. Caudwell Group directors and senior managers have been instructed not to take calls or make comment on the matter.

However a usually-reliable trade source said the departures of Slee and North are linked with Dextra sourcing its Nokia accessories from grey sources rather than from official Nokia UK channels.

BTCellnet says there is nothing new about this as its U prepay service has for some time had no service charges or expiry dates on vouchers. But the network did acknowledge that the ability for an Orange pre-pay customer to migrate to contract was a new feature.

Just Talk pre-pay customers will be able to migrate to an Orange contract tariff at no charge and retain their number. New Orange Just Talk call charges are 5p a minute (off peak) and 25p a minute (peak). Orange to Orange calls are as low as 5p a minute and also come with free text messaging until May.

And Orange CEO Hans Snook accused other networks of knowingly fleecing pre-pay customers of 500 million a year in hidden service charges. He called for the industry to end its practice of misleading statements and small print catches.

Vodafone spokesperson Corinne Norris commented:

It seems Oranges announcement reflects what is already available. Most of our customers use up their calling credit well within the three months they have. Vodafone has led the way in pre-pay with over three million customers more than Orange and One 2 One put together. We think Hans Snooks comments about customers being fleeced do the customer great injustice. Todays customers are more sophisticated than that.

Snook further said:

Few would argue any longer that we are rapidly moving to the position where the great majority of individuals will own a mobile phone and where the mobile will increasingly displace traffic that used to be carried by fixed line phones said Snook.

It is sad to see the mobile market place littered with confusion and competitive claims often based on wholly misleading information.

The mobile industry has to learn that there is only one thing that matters: giving customers a fair deal and treating them in a way that creates trust.

We are a young industry but that does not seem to stop us from exhibiting some of the vices of old-established industries.

Pre-pay phones are a currently a good example. Pre-pay offers individuals perhaps the easiest way to buy a mobile phone. They put the individual in charge of what they pay and the purchase cost is relatively low.

In consequence as many as 5.3 million pre-pay phones have been bought this year alone. Thats out of a total pre-pay market today of 8.1 million.

Over the next two months Orange expects the market to grow by a further 3.5 million. With that rate of growth it is important that individuals understand the running costs.

Our research shows people do not. Recent research shows that 78 per cent of those considering pre-pay are doing so because they want to control costs.

Yet how many of these people realise that pre-pay can be the most expensive way to pay – especially for the millions who are paying 50p a day over 180 a year simply for the privilege of having a phone before they even make a single call?

In a market research survey recently commissioned by Orange almost half of pre-pay customers didnt know that some networks make a service charge for pre-pay and over half of those who knew they paid a service charge didnt know how much it was.

Most pre-pay vouchers have validity dates. Yet few customers count the cost of pre-pay vouchers which expire whether or not the calls that have been paid for have been made.

Orange is launching a pre-pay service with a difference. No expiry dates on vouchers. No daily monthly or yearly service charges.

Every penny spent is on call charges. And those charges are down in price.

Not just within the UK but internationally where Orange is charging over 20 per cent less than BTs standard rates and significantly less than some other mobile operators.

We are also offering our new pre-pay customers free text messaging. If customers find that an Orange contract tariff suits them better all our pre-pay customers will be able to switch at no cost and keep their existing telephone number.

ICO Global Communications (Holdings) ICO Global Communications which was established in January 1995 as a private company to provide global mobile personal communications has failed to receive binding agreements that investors will buy $600 million of B shares and convertible notes.

And Iridium is now under the protection from the USA courts from bankruptcy.

ICOs Hammersmith-based office last week laid off 40 members of staff. Casualties included marketing boss Chris Moss who joined ICO a year ago. Moss is widely credited with coming up with Oranges brand identity when he worked at Orange in 1993 and 1994.

ICO and its investors are now considering a modification to its financing proposal which would result in a lower minimum investment threshold and substantial deferrals of amounts payable in 1999 to suppliers under major contracts. The proposal would be subject to shareholder and bondholder approvals.

Major suppliers to ICO have deferred payment on some contracts. The company has not paid the interest due August 2 on some of its debt.

A gloomy statement from ICO said:

There are substantial uncertainties and significant conditions associated with the completion of the modified financing proposal. No assurance can be given that the modified financing proposal will be agreed by the Company and its strategic investors or if agreed that the financing will be completed.

As previously disclosed the Company was unsuccessful in its attempt to raise equity from its shareholders and strategic investors through its rights offering which expired on July 27.

Failure to complete the financing proposal or the needed subsequent financings to the point of generating positive cash flow from operations will have a material adverse effect on the Companys liquidity results of operations and financial condition as well as on the companys continued viability.

Meanwhile Iridium LLC (North America) has filed for Chapter 11 bankruptcy protection to stave off creditors who are owed more than $3 billion.The Chapter 11 procedure will give the financially-stricken global mobile satellite phone network a chance to restructure itself.

Major shareholders Motorola and Nippon Iridium say they will invest additional funds to support the restructuring process.

We remain in full support of Iridium LLC as the company goes through its restructuring under Chapter 11 Bankruptcy proceedings said Jim Walz CEO and president of Iridium North America:

Iridium North America is an independent and wholly-owned company. We own the licenses to use the Iridium satellite constellation. Therefore there will be no lapse in Iridium service provided by Iridium North America and we will continue to work with our service providers to sell the Iridium product and service. We have a solid business plan a sound financial structure and a satisfied customer base. During the month of July Iridium North America enjoyed its highest percentage of subscriber growth to date indicating acceptance of our new lower airtime rates and decreased equipment costs.

American law allows Iridium to complete its financial restructuring under a court-supervised process. Iridium says its customers will not be affected by this action and that there will be no interruption of service.

The action is the most efficient way to conclude Iridiums restructuring negotiations said John Richardson CEO of Iridium LLC.

We are confident that Iridium will emerge from this process as a stronger and more vibrant company in the telecommunications marketplace.

Motorola says it will continue its full operational support during the reorganization process and continue to invest the next generation of Iridium products.

Motorola stated:

We are encouraged by Iridium managements decision to pursue this course for restructuring the business. Given the progress being made to date to restructure Iridiums capital structure we are optimistic that a restructuring plan can be accomplished within 30 days.

Iridium South Pacific has reassured Iridium customers that it will be business as usual for Iridium in Australia New Zealand and the South Pacific. Iridium South Pacific is an independent Australian telecommunications carrier majority owned by Japanese electronics and telecommunications giants DDI Corporation and Kyocera Corporation and trades as a separate entity.

We are confident that Iridium LLC will successfully restructure in the USA. In reality it has no operational impact on Iridium South Pacific. Iridium South Pacific will continue to be a force in the global mobile communication business into the future said Carlton Jennings CEO of Iridium South Pacific.

NB: The ICO and Iridium feature on page 20 was produced before these latest developments.

OFTEL is also looking into Cellnets pre-paid offers to make sure similar issues do not arise. OFTEL has also received a complaint from another company regarding this issue.

Independent service providers led by Cellcom had complained to OFTEL that Vodafone has been selling Pay As You Talk on unfair terms so service providers couldnt compete.

OFTEL has upheld the complaint. Vodafone has now decided to offer pre-pay services on different terms to independent service providers making it easier for them to introduce competing pre-pay offerings.

Pre-pay packages have been the main engine of growth of the mobile market and have proved immensely popular with consumers. It is important for both competition and choice that independent service providers are able to offer their own pre-pay packages to their own customers. But to do this they need to acquire services from Vodafone. This would increase choice and competition to consumers benefit Oftel director general David Edmonds said.

It appeared from our investigation that Vodafone in supplying these services would be discriminating in favour of its own business. Such behaviour would be anti-competitive and unacceptable. Vodafone has accepted OFTELs view and amended its terms accordingly. While this prevents the need for immediate enforcement action Oftel will continue to monitor the sit-uation and the effect of the revised terms.

Vodafone must offer independent service providers services under its licence which obliges the network not to discriminate unduly in favour of its own businesses in the provision of services.

Service providers in the pre-pay sector have been simply acting as distributors. They do not have any contractual relations with end users and have no ability to tailor retail services.

Cellcom argued that a small service provider with few subscribers did not receive enough discount to cover costs and earn a reasonable return whereas Vodafones direct business received the maximum discount and was able to operate with a reasonable profit.

Vodafones new terms are also based on a volume discount. But the percentage discount starts off at a higher rate and fewer subscribers are required to secure higher rates than under the old terms.

Cellcom had alleged that Vodafone apparently refused to sell it the underlying telecoms service at the rate it alleges is paid by Vodafones direct business.

Cellcom estimated Vodafones direct business was purchasing the basic network service from Vodafones network business for no more than 48.00 annually or 4.00 per month. But Cellcom currently pays Vodafone up to 7.85 per month under the current standard service provider contract for the same telecommunications service.

Cellcom said it has repeatedly asked Vodafone to provide it with the underlying telecommunications service involved for 4.00 or less but that Vodafone refused each of its requests.

The idea is to give JWE customers a converged mobile and fixed service with a single bill. ADT is being renamed JWE Communications.

The companys managing director Nigel Adams remains with the company and is expected to join the main board in six months in charge of JWE Telecoms fixed line services.

A key feature of our short-term strategy is the development of our ability to offer converged fixed and mobile services and product. The acquisition of ADT is a significant step forward in that direction and one from which we can build a leading all-round telecommunications operation said JWE chief executive Tony Farmer.

JWE has had its share price pushed below 1 lately as the City responded badly to a recent profits warning.

A total of 350 Brightpoint employees around the world are to lose their jobs.

The UK closure follows disastrous losses made by its UK trading division which was closed down last year. The company was never able to make up the lost revenue.

Brightpoint will also have to write off the 8 million it reportedly paid a year ago to buy distributor and service provider WaveTech.

The abandonment of the UK can only mean good news for ex-WaveTech director Kevin Brummitt who will probably now be free to re-enter the UK distribution business free of any anti-competitive restraints.

Only last month Brightpoints European president Anders Tortstensson told Mobile News the company was committed to its UK business and would be looking for network contracts.

Torstensson is believed to hold one of two executive vice president positions to be eliminated

The official Brightpoint statement says:

The Companys operations in the United Kingdom have encountered increased competitive pressures from trading companies (who buy product from sources other than the wireless equipment manufacturers and sell the product to wholesale customers other than network operators or their dealers or other representatives) and a continuing trend in the United Kingdom of network operators dealing directly with handset manufacturers.

The Plan includes the complete disposal of operations in the United Kingdom including the sale of its airtime reselling business completed in June 1999. It is currently planned that the remaining operations in the United Kingdom will be discontinued no later than July 31 1999.

An informed trade source told Mobile News:

Brightpoint could so easily have been a major player in the UK given the manufacturing accounts it enjoyed. This was not the case. The blame has to fall upon the shoulders of Torstensson. His fundamental decision to close down the trade division without securing a replacement for this revenue was a major mistake. The carried-forward losses made it virtually impossible for them to make a profit. Brightpoints business in the USA remains intact. But analysts in the USA are eagerly awaiting future results.

Brightpoint UK reportedly made a 500000 profit in one month but lost it all soon after with an abortive deal involving around 44000 Nokia Ringo phones understood to be languishing in the companys warehouse.

Brightpoint says there will also be a significant restructuring of Brightpoints China operations. Brightpoint admits it has had problems getting adequate supplies of handsets which coupled with a difficult competitive environment and disappointing joint operations has made its China operations unprofitable.

Brightpoint will exit its two joint operations in China and intends to develop a new strategic alliance. It is also jettisoning its 67 per cent interest in a Hong Kong-based accessories company and are axing operations in Argentina and Poland which were not performing to the Companys goals due primarily to scale and market factors.

The Taiwan presence will be scaled down by closing certain facilities. The distribution centre in the Netherlands will also be shut leaving the distribution centre in Germany to handle this region.

The restructuring and closures will cost Brightpoint from between $75 million to $90 million in the write-off of goodwill and investments accounts receivable inventory and fixed and other assets related to the closing of the divisions and redundancy payments.

Some analysts are mooting that a merger between Brightpoint and CellStar would make strategic sense for both parties.

The consortium will be known as Orange a.s. The other consortium member is GiTY a Czech IT and telecom company.

If the bid for the first and only GSM 1800 licence is successful the new company promises to create up to 2000 jobs over five years in the Czech Republic and provide the latest in telecoms training.

Orange also plans to locate offices and customer call centres in locations including Prague Ostrava and Pilsen.