Vodacom’s results inflated by fraudulent subscriptions
In its 2020 annual report, Vodacom told investors that it achieved 9.4% growth in content-related revenue and that its mobile gaming platform, PlayInc, had grown to 883,000 subscribers.
What Vodacom did not tell them is that a large number of the paying customers were fraudulently subscribed to the service.
To understand the situation, you have to turn the clock back to 2020, when MyBroadband exposed widespread fraud on Vodacom’s network.
An independent industry investigation involving hundreds of thousands of SIM cards blew the lid on mass-scale airtime theft from Vodacom customers.
It showed that fraudulent wireless application service providers (WASP) used a gateway developed by Vodacom to subscribe users to services without their permission.
Large amounts of money were stolen from Vodacom subscribers, but curiously the mobile operator downplayed the fraud and said its subscribers were protected against rogue WASPs.
Vodacom could have easily stopped the fraud by blocking WASP billing by default and giving users the choice to enable it if they want. However, it refused to do it.
It was strange that Vodacom was so callous regarding widespread fraud and airtime theft on its network.
New information has now shed light on the situation.
The fraudulent subscriptions involved many of Vodacom’s own content and entertainment services, which bolstered the revenue and subscriptions of its content services.
Information supplied to MyBroadband showed how Vodacom clients were subscribed to a slew of services without their permission.
According to a person familiar with the matter, Vodacom executives were aware of what was happening and even endorsed it.
It was only after numerous media reports from MyBroadband that the mobile operator decided to act.
Vodacom PlayInc example
A good example of fraudulent subscriptions that inflated subscriber and revenue figures is Vodacom’s gaming platform, PlayInc.
Vodacom first mentioned PlayInc in its 2019 annual report, saying it made good progress in most of its chosen verticals in digital consumer services, including gaming (PlayInc).
A year later, Vodacom reported that it delivered 9.4% growth in content-related revenue thanks to the “solid growth of Video Play, MyMuze, PlayInc, and sports”.
What surprised many people is that PlayInc had 883,000 subscribers. To sign up nearly a million subscribers shortly after launch sounded like a miraculous feat.
However, an investigation revealed that PlayInc and Vodacom Games featured prominently among fraudulent subscriptions during the period.
Many subscriptions happened on machine-to-machine (M2M) and Internet-of-Things (IoT) SIMs, which leaves no doubt that they were unauthorised.
Therefore, the high PlayInc and other content service numbers Vodacom reported were significantly inflated by fraudulent subscriptions.
The bills below show the fraudulent Vodacom subscriptions from different accounts, including M2M and IoT SIMs.
Vodacom responds
Vodacom explained that fraudsters had found a way to abuse its direct-charge-to-bill (DCB) system and steal money from Vodacom customers.
Following the media reports in 2020, Vodacom put more controls in place to limit DCB fraud like unauthorised subscriptions and airtime theft.
MyBroadband asked Vodacom how many PlayInc subscriptions were fraudulent, but the company could not answer this question.
Vodacom could also not say if all clients who were fraudulently subscribed to content services, like PlayInc, were refunded.
Instead, Vodacom said the insinuation that a material quantum of revenue from PlayInc was fraudulent is false and baseless.
“Vodacom did everything possible to refund subscriptions that could have been fraudulent to the extent that we also refunded customers that had legitimately subscribed to services,” it said.
However, the company did not explain how the illegal subscriptions and airtime theft occurred on its own services, like PlayInc.
It is important to note that when Vodacom was confronted with the evidence of airtime theft in 2020, it claimed that it prohibited content subscriptions on M2M and IoT tariff plans.
It also said that it did not allow WASP billing without double opt-in and had a stringent on-boarding and vetting process to prevent problems.
At the time, Vodacom attacked MyBroadband for reporting on the widespread fraud on its network. It also claimed that a ‘single source with ulterior motives’ was behind the reports.
However, after continued media reports, Vodacom launched an investigation that revealed that MyBroadband’s reports were accurate.
It resulted in the blacklisting of numerous companies that stole money from large numbers of Vodacom subscribers.
Vodacom told MyBroadband it brought the fraud on its network to the attention of its auditors, Ernst & Young, during the latter part of 2020.
MyBroadband asked Ernst & Young for comment, but the company said it does not provide comment outside of its reports.
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