Big revelation in Vodacom-WirelessG case

Vodacom has filed a response to WirelessG’s urgent court application, arguing that a loss of income of R1.4 million per month is behind WirelessG’s urgent court application.

WirelessG filed an urgent court application in January 2013, arguing that Vodacom is reneging on its shareholder agreement and is in breach of its first right of refusal when it comes to WiFi provisioning.

However, Vodacom said that the main driver behind WirelessG’s urgent court application is money.

Vodacom’s five year retail agreement to resell WirelessG retail products – in which Vodacom paid WirelessG R300,000 per month – is coming to an end in February 2013.

Vodacom decided to terminate this retail agreement because it only generated R20,000 in WirelessG product sales, which means that the payment of R300,000 for this service did not make financial sense.

However, this is not the only lost revenue for WirelessG. Another agreement called the “binding agreement”, in which WirelessG was contracted by Vodacom to supply guest WiFi services to the Southern Sun group also comes to an end in February 2013.

According to the Vodacom court documents, WirelessG received approximately R1.1 million per month over a 24-month period for its services related to the Southern Sun agreement.

This means that WirelessG stands to lose an income of around R1,400,000 per month at the end of February 2013.

According to the Vodacom legal document, the combined total of monthly payments and Vodacom’s capital investments in WirelessG comes to more than R100 million.

“The reality is that the drying up of Vodacom’s financial support with effect from end February 2013 – when the Retailer Agreement and the Binding Agreement terminate – has brought about this application,” Vodacom said in its submission.

Vodacom’s Tlhabeli Ralebitso added in its court submission, that WirelessG never brought up these issues in five years of its partnership with Vodacom. This raises questions regarding the timing of WirelessG’s urgent court application.

According to Vodacom, the WirelessG business is unlikely to be sustainable without this financial support.

MyBroadband asked WirelessG CEO Carel van der Merwe for feedback about Vodacom’s claims, but he did not comment by the time of publication.

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