Vodacom’s botched R20-billion Please Call Me case

Kenneth Nkosana Makate says Please Call Me (PCM) generated R250 billion for Vodacom, and they owe him R20 billion for proposing it. Curiously, the mobile operator has no answer to his claim.

The Supreme Court of Appeal (SCA) recently upheld a High Court ruling that Vodacom should pay Makate a substantial sum for proposing the service to the mobile operator.

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.

The service ultimately became Please Call Me. He has been fighting Vodacom for 15 years for compensation, which his manager promised him.

The Constitutional Court ordered Vodacom and Makate’s teams to negotiate reasonable compensation in good faith. It designated Joosub as the deadlock-breaker.

After a deadlock arose, Joosub offered Makate R47 million. However, he rejected the offer and challenged it in court.

In 2022, the High Court ordered Vodacom CEO Shameel Joosub to recalculate the offer, adding that Makate was entitled to at least 5% of all PCM revenue.

Vodacom appealed this ruling. However, the SCA dismissed Vodacom and Joosub’s appeal and confirmed the High Court’s order.

It ruled that Vodacom must pay Makate between 5% and 7.5% of the total voice revenue generated by the Please Call Me product over 18 years, plus interest.

Makate’s legal team previously calculated that Vodacom generated R205 billion over 18 years through PCM. Adding interest, Makate wants around R20 billion from Vodacom.

In an interview with SABC, Makate said his idea generated 12 billion please call me messages annually for Vodacom.

“Through Please Call Me, Vodacom generated over R250 billion in its South African operations alone,” he said.

He added that Vodacom rolled out the service in 19 countries. “I am not even claiming compensation for revenue in these countries,” he said.

Makate argued that people should understand the context of how much revenue Vodacom generated from his idea.

Daily Investor asked Vodacom whether Makate’s claims were accurate, but the mobile operator preferred not to comment.

“We’re not commenting beyond the statement we sent at this point,” Vodacom spokesperson Byron Kennedy said.

Vodacom previously said when Please Call Me was launched it did not generate any revenue for Vodacom as subscribers were not charged for the service. It was offered for free.

“The intended plan to charge for it after an initial period was abandoned since there were many similar services in the market, which were offered for free,” it said.

“It is not, nor ever has been, a money-spinner.”

David versus Goliath

The battle between Makate and Vodacom has evolved into a David versus Goliath story, where many South Africans support the ‘little man’ against the ‘evil corporate’.

Vodacom has endured an assault on social media, and there were even protests which shut down its head office.

In 2019, Vodacom was forced to close some of its stores as the protest action around Makate’s compensation intensified.

Vodacom could, justifiably, feel aggrieved at the hate directed at it because of this case. Offering anyone R47 million for an idea – and an idea alone – is incredibly generous.

To put it in perspective, before the Makate offer, R500,000 was the highest amount it had ever paid for an idea that helped the company.

However, much of Vodacom’s pain is self-inflicted. It has handled the matter poorly from the start.

Instead of countering Makate’s claims in public, Vodacom maintained a strict ‘no comment’ policy on many aspects of the battle.

In the absence of counterinformation from Vodacom, people believed what Makate and his team said.

For example, many people take it for granted that he deserves a share of the Please Call Me revenue for his idea – a foreign concept in business. Many judges form part of that group.

Stephan Lewandowsky, a cognitive psychologist at the University of Bristol, explained that people will believe anything they see or hear by default.

He added that the more something is repeated, the more likely people are to believe that it is true. It forms part of the “illusory truth effect”.

“The more something is repeated, the more familiar and fluent it feels whether it is misinformation or fact,” he told The Washington Post.

Makate and his team won this battle. Independent of what is true or false, many people, including judges, believe Makate’s story instead of Vodacom’s.

The legal defence Vodacom did not use — or even wanted to mention

Shameel Joosub, Vodacom CEO

Ari Kahn, who previously consulted for MTN, created the “Call Me” technology in 2000 and said Vodacom has in private acknowledged him as the inventor.

The SA Patent office granted the Call Me patent to Kahn and MTN, recognising Kahn as the inventor on 22 January 2001.

As the true Please Call Me inventor, Kahn believes Makate should not get a cent from Vodacom for his “invention”.

Kahn said Makate was not the originator of Please Call Me, adding that the courts never once ruled he invented the service. “You cannot invent an idea – which is all he proposed,” said Kahn.

Kahn said Makate has no rights to the Please Call Me service and no rights to compensation as “the Kahn/MTN patent constitutes Prior Art”.

He added that Vodacom did not benefit one iota from Makate’s contribution but rather from MTN choosing not to enforce its rights at the time.

“The entire case has been portrayed as ‘the little guy denied his due by the big bully network’ to garner sympathy and obfuscate the fact that he did not actually invent the service,” Kahn said.

As Kahn was the true Please Call Me inventor, with the patent to prove it, it raises the question of why Vodacom shied away from using this information in its legal battle with Makate.

In fact, Kahn warned Vodacom in May 2015 that it was making a “catastrophic and strategic miscalculation” in its legal defence.

In a letter to Vodacom CEO Shameel Joosub, Kahn told him that Vodacom’s legal team was making a mistake in trying to convince the court of “deficiencies in contract”.

Kahn advised Vodacom to focus on the “irrefutable intellectual property rights to the Call Me Service” instead.

“This case hinges entirely on intellectual property law – on who owns the creation and who has the right to compensation,” Kahn told Joosub.

The inventor is “whoever publicly discloses first”, and rights are conferred upon whoever files for protection under the sovereignty of IPR law.

“The irrefutable fact is the Call Me technology was created by me in 2000 during my tenure at MTN as lead R&D consultant,” said Kahn.

Kahn described this defence as a silver bullet to win the case. However, there was one problem – Vodacom would have had to admit that it essentially launched a technology owned by MTN.

There is speculation that MTN threatened legal action against Vodacom when it launched Please Call Me. It did not follow through to avoid a nasty spat between the operators.

Kahn explained that Vodacom may have felt legally exposed and vulnerable, acknowledging him and MTN as the source of the service.

It is also interesting to note that the Please Call Me patent entered the public domain in 2007 when MTN failed to pay a yearly annuity.

It is unclear if it was deliberate by MTN or whether it was an oversight not to pay the annual fee.

This article was first published by Daily Investor and is reproduced with permission.