The fine is a result of two investigations by Ofcom which found Vodafone was mishandling customer complaints and failed to credit the accounts of more than 10,452 pay-as-you-go customers who topped up their accounts.
The breaches took place between January 2014 and November 2015, and December 2013 and April 2015, respectively.
Ofcom consumer group director Lindsey Fussell said: “Vodafone’s failings were serious and unacceptable, and these fines send a clear warning to all telecoms companies.”
Matthew Howett of technology research firm Ovum said the size of the fine marked a more aggressive approach from the regulator.
He said: “This isn’t the first time Ofcom have levied a fine for this type of thing, but is certainly the largest and reflects the scale of the problems Vodafone has had. EE were fined £1m last year for its complaints handling process and TalkTalk and Tiscali were fined £3m in 2011 for billing issues.”
The fine must be paid to Ofcom within 20 working days, and the money will be passed to the Treasury.
Vodafone said: “We deeply regret these system and process failures. 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.”
The company said it has fully refunded or recredited more than 10,422 customers an average of £14.35 each, and has made a £100,000 donation to “a number of UK charities” in lieu of being able to track down the remaining affected customers.
Ofcom said it took Vodafone’s customer reimbursement plans and willingness to enter into formal settlement into account, cutting the company’s fine by 7.5% as a result.
Vodafone blamed the pay-as-you-go credit failure on a “complex IT migration” that involved moving more than 28.5 million customer accounts to a new system starting in 2013, leading to some mistakes in billing data and price plans and a “sharp increase” in the number of customer complaints.
It said the IT failure was resolved by April last year, adding that all customer accounts are now on the new system.
The company also said it has invested an extra £30 million in customer service training and hired 1,000 new UK call centre personnel.
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.”