Stop Cell Phone Trafficking

U.S. COURT SENDS INTERNATIONAL PREPAID MOBILE PHONE TRAFFICKER TO PRISON FOR 57 MONTHS

TracFone Wireless Inc., the largest U.S. provider of prepaid mobile phone services, says today’s sentencing of an international trafficker of prepaid mobile phones to 57 months in federal prison is an important milestone in the industry’s battle against the bulk prepaid phone purchasing scheme throughout the U.S., an activity that includes altering the phones’ proprietary software, repackaging the devices (often in counterfeit packaging) and then reselling them domestically and abroad to unsuspecting customers.

News Release

FOR IMMEDIATE RELEASE
October 31, 2008

HOUSTON – TracFone Wireless Inc., the largest U.S. provider of prepaid mobile phone services, says today’s sentencing of an international trafficker of prepaid mobile phones to 57 months in federal prison is an important milestone in the industry’s battle against the bulk prepaid phone purchasing scheme throughout the U.S., an activity that includes altering the phones’ proprietary software, repackaging the devices (often in counterfeit packaging) and then reselling them domestically and abroad to unsuspecting customers.

Muhammad Mubashir, 28, of Sugar Land, Tex., pleaded guilty on May 16, 2008 to charges of criminally disobeying a federal court order prohibiting him from continuing to purchase, tamper with or export prepaid mobile phones. Today Judge Melinda Harmon of the U.S. District Court for the Southern District of Texas handed down Mubashir’s sentence for his crime.

“TracFone will continue to aggressively pursue those who participate in prepaid mobile phone trafficking because it undermines our ability to provide affordable wireless phone service to our customers,” said F.J. Pollak, president and CEO of TracFone Wireless Inc., based in Miami.

TracFone obtained a stipulated permanent injunction against Mubashir and his company, Americas Wireless, from the U.S. District Court in Houston in November 2007, requiring him to cease purchasing and tampering with TracFones. The order resulted from U.S. Customs’ seizure of a shipment containing more than 1,300 TracFones that Mubashir was exporting to a known trafficker in Hong Kong. TracFone subsequently obtained documents proving Mubashir sold approximately 9,000 TracFones, representing more than $1 million in losses by the company.

Schemes like those organized by Mubashir exist across the country and involve groups of “runners” who purchase prepaid mobile phones from major retail outlets. The phones are then passed to middlemen who alter or remove the prepaid software and resell the altered phones as “new”, often in counterfeit packaging, at a significant profit to unsuspecting customers domestically and abroad in Latin America, Asia and the Middle East.

Prepaid mobile phone trafficking is a nationwide concern for the wireless industry because it has the potential to drive up costs to consumers. To make wireless service affordable and accessible for everyone, TracFone heavily discounts the retail price of its phones far below its own cost, but expects to recoup its investment by providing service to customers through the sale of airtime cards and other services.

“Trafficking schemes impact prepaid mobile phone affordability for honest customers because wireless companies can’t afford to lose tens of millions of dollars when they sell product that never results in a customer,” said James B. Baldinger, an attorney with Carlton Fields representing TracFone. “Honest consumers are further harmed when they purchase these altered phones sold as ‘new.’ In most cases, the phones don’t work as they should, and the manufacturer warranty is voided.”

“TracFone is the least expensive way to own a cell phone in America. We are committed to preserving our ability to connect people affordably. The fact is mobile phones improve lives. That’s why TracFone heavily subsidizes the cost of the phones it makes available through major retailers. Studies show mobile phones increase the feeling of personal safety, quality of life, economic productivity and earning power overall, and especially for America’s low-income households,” said Pollak.

TracFone leads the wireless industry in taking aggressive action to stop prepaid mobile phone trafficking and protect consumers, and has filed 43 lawsuits against more than 160 defendants in federal courts in Texas, Georgia, California, Florida and New York. The company has been awarded or obtained consent judgments of more than $30 million in damages and has obtained 33 stipulated permanent injunctions from federal courts finding the conduct illegal and prohibiting defendants from continuing to engage in trafficking.

“Today’s sentencing in Houston is an important milestone in our efforts to shut down prepaid mobile phone trafficking in the U.S. This activity is happening in towns across the country, in stores where law-abiding citizens shop every day,” said Baldinger. “Prepaid mobile phone traffickers are not legitimate entrepreneurs. We contend they are engaging in unlawful activity that harms American businesses and consumers. The fact that one of them is finally going to jail is a wake-up call for anyone else engaging in this activity. We are extremely pleased with this outcome, and we expect to see more prosecutions in the future,” said Baldinger.

About TracFone Wireless Inc.
TracFone Wireless Inc. is the largest prepaid mobile phone service provider in the U.S., and has been the leader in the 12 years since it was founded. TracFone is a subsidiary of America Movil, the fourth largest mobile phone company in the world, and the largest in all of the Americas with more than 153 million mobile phone subscribers – more than AT&T, Verizon and Sprint. America Movil is traded on the New York Stock Exchange under the symbol AMX, and has been named top technology company by Business Week for the past 2 years (Technology Hot 100). For more information, visit www.tracfone.com.

About Carlton Fields
Located in major business centers in Florida and the Southeast, Carlton Fields offers a full range of legal services in more than 30 areas of law. Established in Tampa, FL in 1901, the firm maintains offices in Atlanta, Miami, Orlando, St. Petersburg, Tallahassee, Tampa and West Palm Beach. Additional information is available on the firm’s web site located at www.carltonfields.com.

About James B. Baldinger
A member of Carlton Fields’ Business Litigation and Trade Regulation, Telecommunications Law, and Intellectual Property Practice Groups, Baldinger practices complex commercial litigation and provides advice and counsel to companies on security, electronic surveillance, and telecommunications law matters. He formerly served as Vice President of Business Security and Senior Corporate Counsel for AT&T Wireless Services Inc. He earned his J.D., cum laude, from Georgetown University Law Center in 1990 and his Bachelor’s Degree from the University of Pennsylvania in 1987.

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Media Contacts:

Dace de la Foret
(614) 224-8114, ext. 235
C: (614) 746-0828
delaforet@paulwerth.com

Kimberly Ratcliff
(614) 224-8114, ext. 229
C: (614) 571-1452
kratcliff@paulwerth.com