The court ruling that could have ended Vodacom’s battle with Makate over Please Call Me

Had one more Supreme Court justice concurred with a minority judgement, the 16-year Please Call Me battle between Kenneth Nkosana Makate and Vodacom could have been over.

That’s despite the minority judgement ordering Vodacom to pay Makate much more than the R47 million it offered in 2019.

South Africa’s Supreme Court of Appeal recently ordered that Vodacom pay Makate 5%–7.5% revenue share over 18 years, with interest.

This translates to a minimum of R29 billion, a MyBroadband analysis of the relevant court documents showed.

That is R11 billion more than the entire Vodacom Group’s net profit in 2023 and around 15% of the company’s market cap.

A panel of five judges heard the case, and they were split 3–2 in favour of this majority judgement.

The majority opinion was penned by Justice Baratang “Connie” Mocumie, with Justice Selewe “Billy” Mothle and Acting Justice Zamani Nhlangulela concurring.

Justice Ashton Schippers wrote the minority judgement, with acting justice Fayeeza Kathree-Setiloane concurring.

While the minority judgement was in favour of Vodacom for the most part, it ruled against the company in one crucial aspect.

It found that the 5-year timeframe Vodacom CEO Shameel Joosub used to calculate Makate’s compensation was “unreasonable and patently inequitable”.

It ordered that Joosub recalculate the compensation over 18 years. This would result in an amount well over R150 million.

Although still a huge sum of money to pay for an idea, this case has dragged on for 16 years and has cost both parties millions in legal fees.

Had the minority judgement won out, Makate would have still received a huge payday, and Vodacom may have been disinclined to launch a further appeal in the Constitutional Court.

Ashton Schippers, Supreme Court Justice (left); and Fayeeza Kathree-Setiloane, acting Supreme Court Justice (right)

The dispute between Makate and Vodacom dates back to 2007 when he first sent letters of demand claiming he was promised compensation as the inventor of Please Call Me. He launched legal action in 2008.

Makate initially lost in the High Court with a cost order against him, had his appeal rejected by the Supreme Court, but found favour in the Constitutional Court.

While working as a trainee accountant at Vodacom, Makate pitched his idea of “buzzing” someone else’s phone without airtime to a superior.

Vodacom acknowledged Makate in an internal newsletter announcing that his idea was ultimately developed into a product initially named “Call Me”, which launched in March 2001.

Makate was not involved in the development or launch of the product.

There is also compelling evidence that MTN was the original inventor of “Call Me”.

However, the bottom line in the Constitutional Court case was that Makate was promised compensation for the idea.

South Africa’s apex court ordered Vodacom and Makate’s teams to negotiate reasonable compensation in good faith.

Foreseeing that talks would inevitably break down, the court designated Vodacom CEO Shameel Joosub as the deadlock-breaker.

Makate’s legal team demanded compensation of R20 billion, and Vodacom countered with an offer of R10 million. Negotiations deadlocked, triggering the Constitutional Court’s deadlock-breaker clause.

Vodacom communique recognising Kenneth Nkosana Makate for his Please Call Me idea

Joosub used several models to determine suitable compensation and arrived at a figure of R47 million.

Makate rejected Joosub’s offer and challenged his determination in the High Court.

The High Court ruled in favour of Makate, and Vodacom took the matter on appeal to the Supreme Court.

At the Supreme Court, the majority and minority judgements differed in several key areas.

One of these disagreements pertains to a section in Joosub’s 19-page compensation determination where he challenged the assumptions Makate’s legal team made.

Joosub contended that Makate completely overestimated the revenue Please Call Me had generated.

This was a non-trivial mistake to make as Makate’s team was working with publicly available figures from Vodacom’s financial results.

Vodacom, on the other hand, said it had pulled data on the income generated when a mobile customer receives a call — whether from a fixed or mobile network.

Joosub showed that Makate’s estimates effectively claimed that Please Call Me was responsible for over 85% of Vodacom’s voice revenue.

Vodacom offered this data to Makate’s legal team, and they challenged it in court.

According to the majority judgement, Makate asserted that Vodacom’s figures excluded incoming calls and calls from contract subscribers.

The judges stated that Vodacom did not raise any defence. On that basis, they appeared to accept Makate’s argument.

“Before this Court, the least that counsel for Vodacom could do in this regard, was to concede the error. He, however, submitted that the error was not relevant to the determination.”

However, the minority judgement found Vodacom’s explanation sufficient.

“Mr Makate missed the CEO’s point,” it stated.

“[Makate] accused the [Joosub] of ‘deliberately excluding vast amounts’, by not applying the mobile voice revenue figures reflected in Vodacom’s annual financial statements,” the minority judgement explained.

“What Mr Makate overlooks, is that the CEO did not use these… voice revenue figures in his determination of [the] compensation at all.”

The minority judgement noted that neither outgoing voice revenue nor interconnect (incoming) minutes were inputs in any of Joosub’s models.

“It had no impact on his determination. In that determination the CEO describes the four models he considered, the assumptions made and the methodology applied. Mr Makate’s criticism is thus baseless,” it ruled.

Shameel Joosub, Vodacom CEO

Another significant aspect on which the majority and minority rulings disagreed was an issue where Joosub reduced the success rate of Please Call Me for his calculations.

In Makate’s calculations, his team assumed that 27% of Please Call Mes generated a return call. Joosub reduced this by 70% — to 8.1%.

The majority judgement calls the reduction arbitrary and said Joosub provided no answer for this in his reasons for the determination.

However, the minority ruling noted that Joosub answered questions about this in court at length.

Joosub explained the 70% reduction was to try to account for the percentage of Please Call Mes that generated incremental revenue.

“[I]f Vodacom [was] doing a million calls a day, what has Please Call Me done to increase that? Did it increase by 5%? Did it increase by 20%?” the minority judgement quoted Joosub as telling Makate’s counsel in court.

According to Joosub, he was generous for assuming that 30% of successful Please Call Mes generated incremental revenue.

The minority judgement accepted this explanation.

“The CEO gave a detailed explanation for his assumption that 30% of the return calls triggered by PCMs yielded incremental revenue,” it stated.

Joosub conceded he could not prove that his informed guess of 30% was correct because nobody knows or can determine what proportion of return calls yield incremental revenue.

“The CEO drew on his experience and expertise to make an assumption in Mr Makate’s favour that 30% of the return calls yielded incremental revenue,” the minority ruling said.

“Ultimately, his determination was an estimate which, in his words, ‘defies exact computation’.”

While the minority judgement found in favour of Vodacom in most respects, it did take issue with Joosub’s decision to calculate Makate’s compensation over five years.

Here, the majority and minority rulings agreed.

“The CEO’s determination as to the duration of the contract is unreasonable and patently inequitable,” Justice Schippers wrote.

“The decision on the duration of the contract is insupportable on the facts, and the CEO’s version on this score is plainly untenable.”