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5 reasons #PleaseCallMe inventor believes Vodacom owes him R10bn

Aug 20 2019 08:50
Tehillah Niselow, Fin24

Please Call Me inventor Nkosana Makate wants the Gauteng High Court in Pretoria to review and set aside Vodacom CEO Shameel Joosub’s decision in January to award him R47m. 

The figure was previously subject to a confidentiality clause between the mobile giant and Makate who entered negotiations in October 2018. This followed a Constitutional Court judgment in April 2016 that he be paid a reasonable share of the revenue the service had generated. 

Vodacom will not comment as the matter is before the courts, except to say the company will oppose Makate's review application and negotiations were undertaken in good faith. The story of Makate’s invention has now become legendary.

Back in 2000, while working as a trainee accountant at Vodacom, he wanted to stay in touch with his then-girlfriend who was studying outside of Johannesburg. To contact Makate who had a contract, she would call twice and then hang up but sometimes did not have airtime to initiate this.

He came up with the idea of a free SMS service which would allow someone to send an alert to be called back for free. He took the idea to Vodacom’s former head of development Philip Geissler and the service was rolled out in 2001 while he was promised a share of the revenue. 

Makate fought through the courts to be paid out while Vodacom denied the service generated revenue. After the lower courts ruled against him, the Constitutional Court ruled in his favour, saying should the two parties fail to agree to compensation, Vodacom CEO Joosub should be the one to break the deadlock.

Here are 5 reasons why Makate believes Joosub’s R47m determination was “manifestly irregular and unjust” and that the figure owed to him is in fact R10.2bn. 

1. Duration of Revenue Share  

Makate’s founding affidavit filed on August 8 states that Joosub relied on revenue figures from the Please Call Me service over five years to arrive at the R47m which he was offered. This was based on the period that an untested new product in the Vodacom stable would be rolled out - from three years to up to five years, according to Joosub. However, Makate disputes this saying Joosub inserted a term which the parties never agreed to and the contract was for a share in the revenue of the Please Call Me Function in perpetuity. He added that Vodacom has used the Please Call Me service after five years and has benefited from it for 18 years. 

2. Interest 

Makate's legal documents claim Joosub confused two terms: time value of money and interest. The time value of money refers to the principle that money will lose some value in the future, in inflationary economies, such as SA. Interest, on the other hand, refers to compensation creditors receive for the loss of opportunity income. It was unclear how the time value of money was used and calculated, according to Makate.

Makate further maintains that Joosub decided he is only entitled to interest after the ConCourt ruled in his favour in April 2016. This, he says, is “plainly wrong” and he should be entitled to interest over the 18 years that Vodacom refused to pay him.

3. Vodacom refused to Disclose Revenue 

The agreement with Vodacom entitled him to be paid a share in the revenue generated by the Please Call Me function and the mobile giant refused to disclose this, making the proceedings “inherently unfair”, Makate’s affidavit states. Former Vodacom CEO Alan Knott- Craig wrote in his book in 2008 that the free service generated “hundreds of millions in revenue”. 

4. Reliance on Incorrect Revenue Model

The figures used by Joosub to determine the R47m figure did not correspond with publicly available financial information of the listed company, Makate says. He added that the Vodacom CEO excluded contract customers from the call back determinations after receiving a Please Call Me message. Makate in 2000 had been on contract and wanted a free service to communicate with his girlfriend then who was a “Pay as You Go” subscriber”. 

5. Failure to Consider Evidence in Vodacom’s own Audited Statements 

Vodacom’s 2016 and 2017 financial statemented warned shareholders of contingent liabilities or potential payout related to Makate’s claim. According to the auditors, the minimum amount they need to disclose is R960m which, Makate maintains, proves Vodacom was expecting his compensation to be at this level or above. Vodacom’s parent company, Vodaphone plc also disclosed a contingent liability for the Please Call Me service and the threshold for this £180m, which converted to R3.7bn at the time.   

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