Vodafone has been fined £4.625 million by United Kingdom telecommunications watchdog Ofcom -- £3.7 million for failing to credit 10,452 pay-as-you-go (PAYG) customers who topped up their accounts by a collective £150,000, and £925,000 for mishandling customer complaints.
The mishandling of complaints took place between January 2014 and November 2015, and the failure to credit accounts took place between December 2013 and April 2014.
"Vodafone's failings were serious and unacceptable, and these fines send a clear warning to all telecoms companies," said Ofcom consumer group director Lindsey Fussell.
"We deeply regret these system and process failures," Vodafone said in response to the fine.
"We are completely focused on serving our customers; everyone who works for us is expected to do their utmost to meet our customers' needs, day after day, and act quickly and efficiently if something goes wrong.
"It is clear from Ofcom's findings that we did not do that often enough or well enough on a number of occasions. We offer our profound apologies to anyone affected by these errors."
Vodafone attributed the errors to an IT migration issue.
"The matters under investigation were a consequence of errors during a complex IT migration which involved moving more than 28.5 million customer accounts and almost 1 billion individual customer data fields from seven legacy billing and services platforms to one state-of-the-art system," the telco said.
"The IT project began at the end of 2013, and was the largest of its kind ever undertaken by Vodafone anywhere in the world."
Vodafone said that despite making efforts to ensure the transition was seamless, a small percentage of its customers had their accounts "incorrectly migrated", which led to billing errors and in turn to a rise in customer complaints.
The PAYG issue also stemmed from the migration problems, with customers topping up a service that had gone unused for more than eight months still being flagged as being disconnected in Vodafone's systems. Vodafone's operational teams were not fast enough in identifying this IT failure, "and did not fully appreciate its significance once they did so", it said.
By the time the PAYG issue was escalated to senior management, Ofcom had already intervened, as over a year had passed since the problem first began occurring in December 2013. It was resolved in April 2015, 11 weeks after senior management became aware of the problem, and a system change was then implemented in October that year.
"Vodafone's customer service agents were not given sufficiently 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," Ofcom said.
"Vodafone's procedures 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."
Vodafone accepted that it had not been timely, consistent, and fair in handling and resolving customers' issues.
As a result, Vodafone refunded and re-credited 10,422 customers an average of £14.35 each. In lieu of repaying the 30 other affected customers that it was unable to find, Vodafone also donated £100,000 to several charities in the UK.
It has also spent £30 million on more than 190,000 hours of training for its customer service representatives, and on hiring 1,000 new workers for its UK-based call centre.
"We fully appreciate the consequences for our customers of various failures in the migration process over the last three years," Vodafone 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 are also confident that our customers are already beginning to see the benefits of our substantial investment in new systems designed to meet their needs much more effectively in future."
Vodafone must pay the £4.625 million Ofcom fine within 20 business days, with the money to be passed on to the Department of Treasury.