Vodacom scores win against Please Call Me idea-man

The Constitutional Court says it will hear Vodacom’s appeal against a Supreme Court ruling in favour of Please Call Me idea-man Nkosana Kenneth Makate.

Vodacom announced the development on the JSE’s news service on Tuesday.

“The Constitutional Court of South Africa issued a directive that it will hear Vodacom South Africa’s application for leave to appeal in the PCM matter, in tandem with its appeal against the SCA Judgment,” it said.

Vodacom filed papers in South Africa’s apex court in February after the Supreme Court of Appeal (SCA) ordered it to pay Makate 5%–7.5% revenue share over 18 years, with interest.

It also ordered that Vodacom use models that Makate’s legal team developed to calculate the revenue generated by Please Call Me.

According to Vodacom’s calculations, that amounts to compensation of between R29 billion and R63 billion — or 15% to 32% of its market cap.

The entire Vodacom Group’s after-tax profit last year was around R18 billion.

This wide range in the possible compensation amounts was one of the issues Vodacom raised with the Constitutional Court.

Vodacom criticised the SCA’s ruling heavily, saying it was unintelligible, incomprehensible, and vague, rendering them incapable of implementation and enforcement.

The dispute between Makate and Vodacom dates back to 2007, when he sent letters of demand to the company stating he was promised compensation for his idea.

Makate launched legal action against Vodacom in 2008.

While a trainee accountant at Vodacom, Makate came up with the idea of sending 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.

The case first reached the Constitutional Court eight years ago, when it found in favour of Makate and ruled that Vodacom owed him compensation.

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.

MTN had patented and launched a similar product — also marketed as “Call Me” — in January of that year.

However, South Africa’s courts ultimately found that the issue was not whether Makate had the intellectual property rights to Please Call Me, but that he was promised compensation for the 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.

Whereas the majority judgement said Vodacom had to use Makate’s models, the minority judgement said Joosub could use his models and just recalculate the compensation over 18 years.

Vodacom said this would’ve amounted to R186 million.

After Vodacom lodged papers with the Constitutional Court, it also offered to return to the negotiating table, which Makate’s team accepted.

However, the parties suspended talks earlier this year.

Makate’s legal team said they were waiting for a decision from South Africa’s apex court on whether it would hear Vodacom’s appeal.

The Chief Justice has given Vodacom until Thursday, 26 September 2024 to file an abridged paginated record to determine the issues that must be heard.

It then has until Thursday, 10 October to file written arguments. Makate’s team has until 17 October to file their written arguments.

The date of the hearing will be set in due course.