Regulator Hits Vodafone With Multibillion-Dollar Fine--Update

(Rewrites, Updates with further detail.)

By Simon Zekaria and Rory Gallivan

LONDON--U.K. communications regulator Ofcom on Wednesday fined Vodafone Group PLC (VOD.LN) 4.6 million pounds ($5.6 million)--its largest-ever fine of a telecom operator--for breaking consumer protection rules after the British telecommunications giant erred when transferring customer data to a new billing system.

In a statement, the regulator said its investigation of Vodafone, the world's second-largest wireless carrier by subscribers after China Mobile Ltd., uncovered mis-selling, inaccurate billing and poor complaints handling procedures between 2013 and 2015. It called the behavior a "serious and sustained" breach of current laws.

Failings included 10,452 pay-as-you-go customers losing out when Vodafone failed to credit their accounts after they paid to top up their mobile phone credit, Ofcom said. The affected customers collectively lost GBP150,000 over a 17-month period, it said.

"Vodafone's failings were serious and unacceptable," said Lindsey Fussell, Ofcom's consumer group director. The fine was reduced by 7.5% after Vodafone agreed to a settlement, Ofcom said.

Vodafone said the problems were due to a migration of its information technology systems, which involved transferring over more than 28 million customer accounts.

"We deeply regret these system and process failures," the Newbury, U.K.-based group said.

Explaining that the errors were due to the data transfer, it said: "Despite multiple controls in place to reduce the risk of errors, at various points a small proportion of individual customer accounts were incorrectly migrated, leading to mistakes in the customer billing data and price plan records stored on the new system."

"The IT project began at the end of 2013 and was the largest of its kind ever undertaken by Vodafone anywhere in the world."

It also said it made errors in handling customers' complaints.

Vodafone must pay the fine to Ofcom within 20 working days, which will be passed on to the U.K. government's economic and finance ministry.

At 0852 GMT, Vodafone shares were down 0.1% at 226 pence, valuing the company at GBP60.1 billion.

Write to Simon Zekaria at [e-mail] and Rory Gallivan at [e-mail]

(END) Dow Jones Newswires

October 26, 2016 05:19 ET (09:19 GMT)

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