Makate and Vodacom stop Please Call Me negotiations

Vodacom and Please Call Me idea-man Kenneth Nkosana Makate have suspended their negotiations while the Constitutional Court considers whether to hear the mobile operator’s appeal.

MyBroadband recently asked Makate’s legal team and Vodacom how talks were progressing after they reopened negotiations in February.

They previously said that the negotiations were strictly confidential.

This time, both said there was nothing new to report. However, Makate’s legal team also said the parties were waiting for a decision from South Africa’s apex court.

This suggests that talks have been put on ice until the Constitutional Court reveals whether it will hear the case.

If it hears the case, it will be the second time the fight over Vodacom’s Please Call Me service has gone before South Africa’s highest court.

The Constitutional Court first found in favour of Makate eight years ago, ruling that Vodacom owed him compensation for his idea.

At that point, the dispute had already been in South Africa’s legal system for eight years, with the High Court and Supreme Court initially ruling against Makate.

Makate asserts that he invented the Please Call Me, and is owed and was verbally promised compensation for his invention.

While a trainee accountant at Vodacom, Makate came up with an idea to send a missed call to someone’s phone without airtime.

Emails in court documents show that he pitched the idea to his boss and wrote a memo about it on 21 November 2000. He called it the “buzzing option”.

Vodacom’s product development team ran with the idea and made it into what became Please Call Me. The first version of the service launched in March 2001.

Makate’s emails also showed a conversation between him and Vodacom product development manager Philip Geissler, where he requested a reward for his idea.

Geissler said he would discuss the issue with then-CEO Alan Knott-Craig.

“As for rewards. All staff are expected to assist the company to achieve its goals. That is part of normal business,” Geissler wrote in an email to Makate.

“As for you and your assistance. Once the product is launched (and assuming it’s successful) I will speak to Alan. You have my word,” Geissler said.

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

When the case reached the Constitutional Court the first time, Vodacom disputed that anyone had entered into a verbal agreement with Makate.

Vodacom also argued that even if there was such an agreement, Geissler had no authority to commit the company to any compensation, or even a discussion about potential compensation with the CEO.

The court did not buy this argument and ruled that Geissler had the ostensible authority to enter agreements on Vodacom’s behalf.

In their respective rulings, Justice Chris Jafta and Acting Justice Malcolm Wallis, with others concurring, noted that Vodacom had failed to call Geissler as a witness to rebut Makate’s claims or those of his witnesses.

As a result, they ruled that Vodacom and Makate must negotiate fair compensation in good faith.

Foreseeing a breakdown in talks, the court also accepted Makate’s suggestion that Vodacom’s current CEO be designated the deadlock breaker — in line with Geissler’s original email promising a discussion with Knott-Craig.

According to court documents, Makate demanded R20 billion, and Vodacom countered with R10 million.

Current Vodacom Group CEO Shameel Joosub was ultimately called on to break the deadlock and returned with an offer of R47 million in January 2019.

Makate rejected the offer, labelling it “shocking” and “an insult”.

This began the case’s journey back to the apex court, with Makate’s team launching fresh legal action in the High Court, arguing that Joosub had made a mistake in his calculations.

The High Court ruled in Makate’s favour. Vodacom appealed, and the Supreme Court of Appeal (SCA) also found in Makate’s favour.

However, it was a close ruling, with a panel of five judges split 3–2.

The critical difference between the two judgements was that the majority said Vodacom should use Makate’s revenue share models to calculate the compensation he was owed.

The minority judgement said Joosub’s models were fine but that he calculated the compensation over the wrong timeframe.

All five judges agreed on one issue: Joosub erred by only calculating Makate’s compensation over five years.

The majority judgement ordered that Vodacom pay Makate 5–7.5% revenue share over 18 years, with interest.

In its Constitutional Court challenge, Vodacom said this works out to between R29 billion and R63 billion, or 15% to 32% of its market cap.

The minority judgement said Joosub should recalculate Makate’s compensation over 18 years, which Vodacom said would’ve amounted to R186 million.

Shameel Joosub, Vodacom CEO

Vodacom has applied to the Constitutional Court for leave to appeal a final time on various grounds, including that:

• The SCA ignored the evidence presented regarding how Vodacom’s proposed compensation was calculated.
• The SCA issued unintelligible, incomprehensible, and vague orders that rendered them legally unenforceable.
• The SCA’s order impinges on the Rule of Law in terms of section 1 of the Constitution, depriving Vodacom of its right to a fair trial under section 34 of the Constitution.

Most recently, Vodafone, Vodacom’s parent company, applied to the Constitutional Court to be admitted as amicus curiae.

Makate’s team opposed the application, accusing Vodafone of trying to boost Vodacom’s case by introducing new evidence beyond what is permitted for an amicus.

They also said Vodafone was exaggerating the potential financial impact to Vodacom.

According to Makate, Vodacom’s calculations that the SCA’s order amounts to compensation of R29 billion to R63 billion was totally inaccurate.

Makate said the amount of R9.7 billion, which he sought when the case was still with the Pretoria High Court in October 2020, remained valid.

In response, Vodafone said Makate had miscategorised its intentions to be admitted as a friend of the court and said its role would be limited.

Vodafone then went on to accuse Makate of being more concerned about Vodafone having a voice in the proceedings than the substance of what it hopes to contribute.