Pat Sidley
THE fledgling cellular phone industry has become the latest field for thieves and fraudsters with about R10- million of theft and crime occuring in the five months of the industry’s life.
The scams are so rife and the amounts involved so steep that police have seconded a full-time officer from the fraud squad to deal with cellular phone crime.
There have already been several arrests and investigations into one operation have resulted in charges being laid.
The range of scams involves:
* The theft of cellular telephone instruments, both here and abroad.
* The “ghost phone scam”, a major fraud involving the re-sale of instruments.
* The fraudulent selling — with falsified documentation — of older technology as new and up-to-date
* The importation of “grey goods” and often stolen goods, which cannot be serviced here.
A serious implication for consumers is that cellular phone networks have not yet been able to put security systems in place, although similar scams have operated abroad for some time and networks operating in South Africa should have been forewarned. Vodacom and MTN have promised that appropriate measures will be in place by November.
However, sceptical service providers, who sell the telephones and network contracts for air time, are not sure adequate security will be up and running by then — and they will take most, if not all, of the losses.
Theo Rutstein, chairman of service provider Teljoy, which believes it has about one third of the market at present, called private detectives to look into the scams when they began to come to light. As a result, police have seconded a senior detective and Teljoy has people in Europe at the moment looking into security aspects.
MTel’s Peter McBride, who has proposed an ethical code of conduct for the industry, believes part of the problem is caused by unethical and sharp practices within the industry itself. They described to the Weekly Mail & Guardian the way the current most serious scam, the “ghost phone”, operates. It hinges on the fact that the two networks, Vodacom and MTel, pay a subsidy to the service providers for each customer the “middleman” signs up for their air time contracts. The subsidy is about R1 000 a customer, who will then pay a monthly fee to the network for the air time the network supplies.
The networks make their money out of the telephone calls made, so the subsidy, or rebate, paid to the service provider for every customer brought into the network is worth their while.
To bring customers in, service providers and their associated dealers often discount telephones to below the price they paid for them because the subsidy they will get from the network will still leave them with an adequate profit.
Typically the scam involves the purchase from an outlet of several telephones at the outlet’s discounted price. The buyers, operating as a syndicate, will sign air time contracts, using fictitious names and addresses, and walk out of the shop with their telephones and the “sim cards” that give access to a network.
They will then take their cheap, brand-new instruments to a service provider, such as Teljoy or MTel, and sell them back — for about the same price that the service provider is paying for new stock. The crooked purchaser will have made a tidy profit.
The sim card can also be sold; it can be used at no cost until the network realises no payments are being made on the contract — or is alerted to the theft of the card – – and blocks its use.
As soon as the network becomes aware that the “ghost scam” is operating on a particular purchase, it will refuse to pay the service provider his subsidy, as the contract is fictitious. So the service provider will lose again.
In one instance investigated by police, a retailer was offered cheap phones — and found he was buying his own back. The phones had been bought at the discounted price, and were being resold to him for more money than he had been paid. The incident tipped Teljoy and then the police to the problem.
Rutstein says he tells his dealers and sales people to demand photocopies of identity documents and other safeguards when instruments and contracts are sold, to ensure the ghost scam is minimised.
There is no industry-wide system of registering instruments, which is why telephones can be stolen and reused. According to McBride, if a stolen phone’s owner is contracted to one network, the thief simply hooks into the other, buying a contract and using his ill- gotten instrument. There is no way of checking.
Vodacom’s Joan Joffe says the firm is concerned about the problem and hopes to have its register up and running by November.
But with well over 100 000 instruments in circulation, many of them stolen both here and abroad, and many of them imported as “grey goods”, they are at the start of a losing battle.