It is the second-largest fine ever handed out by the regulator, after a £5.7m penalty imposed on ITV in 2008 over the “abuse” of premium-rate phone lines in a number of hit shows.

Ofcom carried out two investigations into the telecoms company. Vodafone was fined £3.7m for taking pay-as-you go customers’ money without providing a service in return; and £925,000 for flaws in its complaints handling processes. The penalties have to be paid to Ofcom within 20 working days. The money will be passed on to the Treasury.

Lindsey Fussell, Ofcom’s consumer group director, said: “Vodafone’s failings were serious and unacceptable, and these fines send a clear warning to all telecoms companies. Phone services are a vital part of people’s lives, and we expect all customers to be treated fairly and in good faith. We will not hesitate to investigate and fine those who break the rules.”

Vodafone apologised for its failings and said it had reimbursed all but 30 pay-as-you-go customers who could not be identified. The company made a donation of £100,000 to charity. The average refund per customer was £14.35.

“We deeply regret these system and process failures,” the company said. “This has been an unhappy episode for all of us at Vodafone: we know we let our customers down. We are determined to put everything right … We offer our profound apologies to anyone affected by these errors.”

One Ofcom investigation found 10,452 pay-as-you-go customers lost out when Vodafone failed to credit their accounts after they paid to top up their mobile phone credit, after the company introduced a new billing system. Affected customers lost a combined £150,000 over a 17-month period between late 2013 and early 2015.

Ofcom said Vodafone took action only after the regulator intervened.

The billing chaos left many mobile users disconnected and out of pocket. Complaints about Vodafone’s monthly contracts more than doubled last year, according to figures from Ombudsman Services, and are triple the industry average.

Vodafone said the IT project was the largest it had undertaken and involved moving more than 28.5m customer accounts from seven billing platforms to the new system.

A second investigation found that Vodafone failed to comply with rules on handling customer complaints. Ofcom said Vodafone’s customer service agents were not given clear guidance on what constituted a complaint, while its processes were insufficient to ensure that all complaints were appropriately escalated or dealt with in a fair, timely manner.

Vodafone also failed to ensure that customers were told, in writing, of their right to take an unresolved complaint to a third-party resolution scheme after eight weeks.

The consumer organisation Which? said it was “right that Ofcom has hit Vodafone with a hefty fine for such poor behaviour”. Alex Neill, managing director of home and legal at the group, said: “It must swiftly address the issues repeatedly highlighted by its customers and the regulator, and introduce a complaints system that actually works.”

(Published by The Guardian - October 26, 2016)