Vodacom says it will appeal the Supreme Court’s ruling in favour of Please Call Me idea-man Kenneth Nkosana Makate.
“Vodacom is surprised and disappointed with the judgment and will bring an application for leave to appeal before the Constitutional Court of South Africa,” the mobile operator said.
It did not say what constitutional point Vodacom would launch its appeal on.
The Supreme Court of Appeal (SCA) in South Africa dismissed Vodacom’s appeal to a North Gauteng High Court ruling on Tuesday, 6 February 2024.
The SCA ordered that Vodacom must pay Makate between 5% and 7.5% of the total revenue its Please Call Me (PCM) generated over 18 years, plus interest.
It ruled that Vodacom CEO Shameel Joosub had used an unreasonable and inequitable methodology for calculating the compensation the company offered Makate for his idea.
Makate, a Vodacom finance manager at the time, pitched his idea of a method to “buzz” someone else’s phone without airtime to a superior on 21 November 2000.
His idea was ultimately developed into Please Call Me, which launched on the Vodacom network in 2001.
Although Makate was not involved in the development or launch of the product — and compelling evidence that MTN was actually the original inventor of “Call Me” — his manager had promised him compensation for the idea.
Makate wrote to Vodacom in 2007 demanding payment and launched legal action in 2008.
The case ultimately ended in front of the Constitutional Court, which ordered Vodacom and Makate’s teams to negotiate reasonable compensation in good faith.
Foreseeing the inevitable breakdown in talks, the Constitutional Court included a failsafe in its ruling that designated Joosub as the deadlock-breaker.
Joosub used several models to determine suitable compensation and arrived at an overall figure of R47 million, which Makate duly rejected and challenged in court.
This fresh round of court battles now seems to be heading right back to South Africa’s apex court.
At the heart of the SCA’s ruling is the dispute over the models Joosub used, and the timeframe over which the compensation and related interest were calculated.
Vodacom had used a 5-year timeframe, arguing to the court that this was generous as suppliers are generally only given a 3-year contract.
Makate’s legal team argued that limiting the timeframe to 5 years was irrational, as Please Call Me had generated substantial revenue for Vodacom for longer than that.
They wanted the compensation calculated over 20 years.
The Supreme Court was unconvinced by Vodacom’s argument and said that the compensation should be calculated from March 2001, when the service launched, to when Joosub first made his R47-million offer in January 2019 — 18 years.
“It would have been an eminently un-businesslike and an unreasonable decision by the CEO not to have extended the contract it made with Makate. As such, this Court determined that the valuation was flawed and inequitable,” the SCA found.
In addition, the Supreme Court ordered that Vodacom must use the models Makate’s team submitted to calculate the monies owed.
Using this model, Makate’s legal team calculated that based on a 5% share of an estimated R205 billion in revenue over 18 years comes to R20 billion that Vodacom owes.
This is double what Vodacom invests into its South African network every year in the form of capital expenditure.
It is also over 10% of Vodacom’s entire market capitalisation, which was R197 billion on Tuesday afternoon.