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Try clearing data for the Location based Wi-Fi application in the phone. This will delete all your saved networks for this feature.
Settings > App's > All > Location based Wi-Fi > Clear data.
Then try again.
This service runs on mobile triangulation not GPS, so make sure that you network operator supports this.
I haven't been able to replicate this, seems to be working just fine in my Xperia Z1 running on the .257 software.
Which build number are you running on?
(Settings > About phone > Build number)
Try clearing data for the Location based Wi-Fi application in the phone. This will delete all your saved networks for this feature.
Settings > App's > All > Location based Wi-Fi > Clear data.
Then try again.
This service runs on mobile triangulation not GPS, so make sure that you network operator supports this.