The Supreme Court of Appeal (SCA) in South Africa has dismissed an appeal by Vodacom and ruled in favour of Please Call Me idea-man Kenneth Nkosana Makate.
It ruled that Vodacom must pay Makate between 5% and 7.5% of the total voice revenue its Please Call Me product generated over 18 years, plus interest.
Based on the wording in the ruling, the 18 years were determined from March 2001 to 9 January 2019 — the date Vodacom first offered to compensate Makate for his idea to the tune of R47 million.
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, 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.
His idea was ultimately developed into Please Call Me, which launched on the Vodacom network in 2001.
Although Makate was not involved in the development or launch of the product (and compelling evidence that MTN was actually the original inventor of “Call Me”), his manager had promised him compensation for the idea.
The case ultimately ended in front of the Constitutional Court, which ordered Vodacom and Makate’s teams to negotiate reasonable compensation in good faith.
It also built in a clause for when talks inevitably broke down, making Vodacom CEO Shameel Joosub the deadlock-breaker.
Joosub used several models to determine suitable compensation and arrived at an overall figure of R47 million, which Makate duly rejected and challenged in the High Court.
The High Court ruled in favour of Makate, and Vodacom took the matter on appeal to the Supreme Court.
“The issue for determination by this Court was the interpretation of the Constitutional Court order, in relation to the CEO’s mandate and ultimate determination,” the SCA stated.
“In conjunction therewith, this Court had to determine whether the high court was correct when it granted the order it did, particularly with regards to the conduct it imposed on the CEO.”
In a statement accompanying the ruling, the Supreme Court summarised that the two parties argued about the period over which compensation must be calculated.
Vodacom said it typically only awards three-year supplier contracts but elected to use a more generous five-year term when calculating the compensation due to Makate.
Makate’s lawyers argued that Please Call Me was immensely successful and that assuming Vodacom would’ve canceled the hypothetical supplier contract with Makate after five years was irrational.
They asked for the compensation to be calculated over 20 years.
“This Court found that the aforementioned must be considered in the context of the duration of the agreement between Makate and the applicant,” the SCA said.
“This Court emphasised that it would have been an eminently un-businesslike and an unreasonable decision by the CEO not to have extended the contract it made with Makate. As such, this Court determined that the valuation was flawed and inequitable.”
Adding thirteen years plus interest to Joosub’s original R47 million determination would already result in a massive payday for Makate.
However, the Supreme Court also ordered that Vodacom must use the models Makate’s team submitted to calculate the monies owed.
Using this model, Makate’s legal team calculated that based on a 5% share of an estimated R205 billion in revenue over 18 years equates to R20 billion in compensation.
This is double what Vodacom invests in its South African network every year in the form of capital expenditure.
It is also over 10% of Vodacom’s entire market capitalisation, which was R197 billion on Tuesday afternoon.
“We acknowledge the recent 66-page judgment handed down by the Supreme Court of Appeal regarding the Please Call Me matter,” Vodacom told MyBroadband in response to a request for comment.
“We are carefully studying its contents and will respond in due course.”