It seems almost certain that exhibitors at the now-cancelled Mobile World Congress will not be refunded their exhibition fees following the GSMA’s decision to cancel the event.
The GSMA has yet to officially announce what offer it will make to Exhibitors, but multiple exhibiting companies have now told TMN that they do not expect to get their money back via the GSMA.
Officially, the GSMA has told exhibitors that it is working through the situation to “formulate a proposal which we hope enables us to maintain our long-term and mutually beneficial partnership”. Companies have been told that they will hear that proposal by 31 March.
“Worst-case financial scenario”
The only public indication that refunds are extremely unlikely came in an interview given by GSMA Director General Mats Granryd to Bloomberg, in which Granryd was quoted as saying, “We’re looking for solidarity and everybody bearing their own costs.”
TMN asked if that report was accurate and if the GSMA could confirm that this meant refunds would not be forthcoming.
A spokesperson replied, “Cancelling the event in these exceptional circumstances was probably our worst-case financial scenario. As a not for profit organisation and the convener of an entire industry and related ecosystem, the implications of this situation are hugely significant for the GSMA. We ask for patience as we work through what has happened and formulate proposals which we hope enable us to maintain our long-established relationships with the entire MWC community.”
Uninsurable
The GSMA’s “worst case scenario” results from the reasons for the cancellation not being covered by its insurance, nor by the insurance exhibitors could take out via their exhibition contracts.
Companies have received an email from the GSMA describing events as “unprecedented and uninsurable”, and the GSMA has confirmed to TMN that its insurance did not cover the exceptional circumstances it faced, due to standard exclusions related to communicable disease.
The bare terms of the exhibitor contract terms and conditions state that if the GSMA cancels the event, then it will refund the exhibitor.
However, a further clause (21.10) states that the GSMA is not liable “for any losses, costs, damages or expenses (whether incurred under contract, tort or otherwise) suffered or incurred as a direct or indirect result of an event beyond the control of the Organizer, including without limitation, any act of God, disease or epidemic, strike, lock-out, industrial disturbance, failure of suppliers, [cut for brevity].”
Nor are exhibitors covered by the extra cancellation insurance that they can take out via the GSMA when they book a stand. There are different levels of cover offered, but the cover lists as its exclusions:
k) Losses caused by or arising directly or indirectly from, or in any way associated with, Severe Acute Respiratory Syndrome (SARS) and its sequelae.
m) Any loss, damage, cost or expense of whatsoever nature directly or indirectly caused by, arising out of, contributed to by, resulting from or in connection with any communicable disease which leads to: i) the imposition of quarantine or restriction in movement of people or animals by any national or international body or agency and/or ii) any travel advisory or warning being issued by a national or international body or agency; and in respect of i) or ii) any fear or threat thereof (whether actual or perceived).
So the final avenue, as far as event insurance goes, for the GSMA to offer a refund would be for the GSMA itself to have had event insurance in place that would cover this cancellation. The GSMA confirmed it does not have that cover these exceptional circumstances.
A statement to TMN said: “The exceptional circumstances related to Coronavirus, which rendered MWC 2020 impossible to deliver, are not covered by the GSMA’s or the exhibitors’ insurance policies … The exhibitor insurance policy is not intended to cover all risks that an exhibitor may have. Exhibitors will assess risks across their organisation and purchase relevant insurances based on their organisation’s risk appetite. The exhibitor t&cs detail the specific cover and all exclusions so exhibitors can make an informed decision. Communicable disease is a standard insurance exclusion.”
The GSMA said that MWC became impossible to deliver because the event’s “biggest asset” – the face to face networking opportunities it offers – became its “biggest risk”. For that reason, “a gathering of this magnitude, in the face of this virus, was impossible to deliver”.
Companies are looking at their own third party insurance to see what cover they may have. One exhibitor said they are also looking into their legal position, although it would not consider proceeding “unless there’s a class action”. [For clarity, there is no hint at all that a class action is forming, and TMN has heard of no such thing. Merely that this exhibitor, speaking informally and anonymously, felt that whatever path it chooses, it would not proceed down a legal route independently.]
What might be in the proposal?
Companies have been told that the GSMA is working on an offer, that it will make by 31st March. This offer will “formulate a proposal which we hope enables us to maintain our long-term and mutually beneficial partnership.”
There’s no word yet what this means in reality. Two exhibitors have told us they are hoping for credits for future events, perhaps even rolling forward in some way to MWC Barcelona 2021. But most exhibitors TMN has been contacted by, or has contacted, do not expect to see their money back.
A selection of quotes “We have not been told officially but it is headed that way.” … “I don’t think we’ve much chance of getting anything back from the GSMA.” … “They haven’t told us anything specifically, just that it’s going to be a wait… assume it’s just going to be a loss unfortunately.” … “They said they’d come back to us but first pass seemed to indicate no refunds.”
The GSMA told TMN that it would communicate any offer soon, and directly with exhibitors. Several exhibitors have told TMN that they would also like to see public communications so that they can assess their situation compared to other vendors. That is why several have asked TMN to explore the situation.
Reserves and costs
The most likely situation is that the GSMA simply cannot afford to give the industry back its ticket, sponsorship and exhibition money. The GSMA uses the income from the MWC events to fund its technical, development and lobbying programmes, as well as its own staff costs and operating expenses.
“We don’t have huge amounts of funds, and all our proceeds are funneled back into the industry,” as Granyrd told Bloomberg.
The latest publicly available information on GSMA accounts is its IRS 990 filing for the financial year ending March 2018. (990 is the filing that non-profits over a certain size must make in to US tax authorities).
That filing, for the year ended March 2018, showed that the conference business is responsible for the vast majority of its income. The filing doesn’t break each individual event, but of its $216.7 million income, $210.7 million was due to its conference activities. In 2017-2018 the regional events were not quite of the current scale of MWC LA and MWC Shanghai – so it is possible that the GSMA now has a slightly more diverse income stream. (We don’t know because the GSMA never publishes its full accounts publicly.)
But whichever way you look at it the cancellation of MWC Barcelona still likely takes with it a huge chunk of the GSMA’s revenue.
Then there are its costs. In FY2017-2018, the GSMA paid $40 million to the Fira Barcelona for its services, and a further $2.6 million to exhibition hotel management services. We don’t know what arrangement the parties have made for fees for the cancelled event, although we do know they have both committed to MWC taking place in Barcelona again in 2021.
So it is hard to see how the GSMA could cover itself if it handed back to exhibitors their exhibition fees, made payment commitments to its Barcelona partners, and carried on with its intended programme of work.
One possible source of rescue is the GSMA’s own reserves. The end-2018 accounts states that the GSMA had “Savings and temporary cash investments” of over $103 million. If those savings still exist, that does appear to give it reserves to at least meet its own costs and some continued operations. But even these substantial reserves would not cover any more than a very limited refund for exhibitors and still enable the GSMA to meet its costs and continue operations as before.
A major risk to the GSMA
In its recent annual report, “Over-reliance on MWC Barcelona” was labelled as the fourth biggest risk facing the organisation, with any impact on the GSMA as a result of that risk materialising being termed “major”. The only level higher than that was “catastrophic”.
None of the exhibitors contacting TMN are suggesting that they are in a catastrophic situation as a result of the cancellation. But some, just as the GSMA has, may now consider if they are over-reliant on this one event and give thought as to how to mitigate that. That could mean spreading their investment over the year with other GSMA events, just as the GSMA has expanded MWC LA and MWC Shanghai.
The greatest asset MWC has it that it offers companies unmatched networking opportunities with senior operator staff, new M&A targets and partner companies all in one place. They simply cannot access that elsewhere and as long as that continues then the event will continue to present an unrivalled opportunity and, on the odd occasion, a major risk.
