2ergo forced to make changes following new industry code of practice

Tuesday, Jun 14 2011 by
2ergo forced to make changes following new industry code of practice

2 Ergo (LON:RGO), the AIM listed mobile business and marketing company, saw its shares slump by 16p to 77.5p during trading this morning on reports that new industry regulations had cast a cloud of uncertainty over its near term net profits.

2ergo provides innovative proprietary mobile technologies and professional services to help its customers develop and execute their mobile strategies. Its services span mobile business solutions that incorporate search, security, advertising, location, proximity, coupons, tickets, mCommerce and data network analytics.

The company’s problem started with the recent publication of the 12th Code of Practice from PhonepayPlus - the phone-paid services regulator. The Code is principally self regulating on the industry and will see the mobile network operators becoming more accountable for ensuring compliance. Ahead of the Code coming into effect in September, network operators have already begun adopting their own operating principles, based on their individual interpretation of the Code. As a result, some of the services operated by 2ergo’s customers are now at odds with elements of the guidelines contained within the operating principles of certain networks.

In response, 2ergo has had to suspend some client services operating on certain networks and is currently carrying out a detailed audit of those services to ensure they are compliant for each network’s particular interpretation of the Code. Where necessary, consumers that are currently using 2ergo’s customers’ services will have to re-sign up. 2ergo insisted the situation would have no financial implications for end users and only a modest impact on the content and make-up of services supplied by either 2ergo or its clients.

Neale Graham, the joint chief executive of 2ergo, said: “The regulation of the phone-paid services industry has always used a single set of guidelines. With the move to self-regulation, different networks are applying different interpretations of the Code. This has led to a change in one area of our business, with both future and some existing services being affected, as the networks have applied their new rules for all customers – new and old. It is very difficult at this stage to assess exactly what the financial impact will be. It may be minimal or it may have a significant short term impact on the group’s net profit but it is expected that this will reduce as end users re-sign up or are replaced. Some customer attrition…

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MXC Capital Limited is a Guernsey-based merchant bank. The Company is engaged in investing in technology companies. The Company is a permanent capital vehicle that is responsible for its strategy, capital raising and investment decisions, as well as the supervision of its London-based merchant banking activities. The Company's segments include Capital Markets segment, Advisory segment and Central. The Capital Markets segment includes the Company's corporate finance and related services division. The Advisory segment includes the Company's advisory and consultancy division, responsible for originating and advising on investment opportunities and providing operational and strategic guidance to clients. The Central segment includes the provision of merchant banking services, including the management of the Company's investments. It focuses on investing in managed services, government and public sector, Internet of Things (IOT), robotics, security and Internet service providers (ISPs). more »

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