Expect Vodacom price hikes if Please Call Me idea-man gets his monster pay-day

If Please Call Me idea-man Kenneth Nkosana Makate gets the massive payday he’s after from Vodacom, it could result in everything from job cuts to price hikes at the mobile operator.

Last week, the Supreme Court of Appeal (SCA) effectively dismissed an appeal by Vodacom and ruled in favour of Makate.

Makate, a former Vodacom finance manager, is credited with presenting the basic idea that was ultimately developed into “Please Call Me”.

Although Makate was not involved in the development or launch of the product — and despite compelling evidence that MTN was actually the original inventor of “Call Me” — this case hinged on the fact that Makate’s manager had promised him compensation for the idea.

The case made it all the way to the Constitutional Court, which ruled that Makate was owed compensation.

While South Africa’s apex court stopped short of determining how much Makate was owed, it foresaw that the parties would struggle to reach an agreement and built a deadlock-breaker into its order.

If negotiations deadlocked, the Vodacom CEO was to determine the compensation.

Vodacom Group CEO Shameel Joosub came back with an offer of R47 million, which Makate duly rejected.

The matter returned to the High Court, followed by the Supreme Court of Appeal.

Vodacom has vowed to take it all the way back to the Constitutional Court after the Supreme Court ordered the company to pay Makate between 5% and 7.5% of the total voice revenue its Please Call Me product generated over 18 years, plus interest.

Based on the wording in the ruling, the 18-year period was determined from March 2001 to 9 January 2019 — the date Vodacom first offered to compensate Makate for his idea.

Makate has been cagey about how much he expects Vodacom to pay him for his idea, declining to answer questions about it in recent 702 and SABC News interviews.

“Let’s allow the court order to be implemented. I don’t want to put the cart before the horse. Let’s allow them to retreat — I think that would be fair,” Makate said in an interview with SABC News.

Shameel Joosub, Vodacom Group CEO

However, Makate had previously asked for R20 billion, later adjusting this to R10.25 billion before interest.

Makate explained in 2019, after his first Constitutional Court victory, that this figure was 5% of the R205 billion in revenue his team calculated Please Call Me earned Vodacom over 20 years from March 2001.

Averaging that out over 18 years yields a principal amount of R9.23 billion.

Assuming an interest rate of 5% per annum, compounded monthly, results in a final amount of R22.64 billion.

The entire Vodacom Group’s annual profit for 2023 was R18.1 billion.

Vodacom South Africa invests about R10 billion per year into its network.

In short, there will be repercussions if Makate is awarded this much.

Vodacom may need to hike prices to make up the money it needs to continue investing in its network — although not too much, for fear of losing customers to MTN, Telkom, and Cell C.

Vodacom might also need to slash its wage bill to cut costs, resulting in job losses.

Another option would be to take on debt or pay off the amount over time.

However, this would still increase the company’s operating costs. It would still need to compensate for this in some way — like price increases and job cuts.

Asked for comment, Vodacom said it was still working through the Supreme Court’s order.

It reiterated that it was surprised and disappointed with the judgment and would bring an application for leave to appeal before the Constitutional Court of South Africa.

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Expect Vodacom price hikes if Please Call Me idea-man gets his monster pay-day