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Safaricom parent faces Sh170bn bill in suit
Thursday February 08 2024
Pedestrians pass a Vodacom mobile phone store in Johannesburg, South Africa. FILE PHOTO
A South African man could receive up to Sh170 billion from Safaricom’s parent company, Vodacom, as compensation for his innovation of the ‘Please Call Me’ (PCM) service used in Kenya and other African markets where the firm operates telecommunication businesses.
In a ruling on Monday, the South African Supreme Court of Appeal said Mr Nkosane Makate, the inventor of the PCM service, is entitled to be paid five– 7.5 percent of the total revenue Vodacom has earned from the service since its rollout in South Africa 2001.
PCM is a feature that allows Safaricom (and other Vodacom subsidiaries) users to send a free message to other subscribers requesting to be called even if they don’t have airtime via short-message service (SMS).
“The applicant is entitled to be paid five–7.5 percent of the total revenue of the PCM product from March 2001 to date of judgment by the second respondent, together with the…interest thereon,” reads the judgment.
Mr Makate’s legal team calculated that Vodacom made about R205 billion (Sh1.7 trillion) from the PCM service between 2001 and 2020 across its markets, which is calculated from the money earned from voice revenues and interconnect fees from calls made after ‘Please call me’ requests.
Read: What ‘please call me’ ruling means
As such, they demand payment of up to R20 billion (Sh170 billion) from the company, about 7.5 percent of what Vodacom has made from PCM between 2001-2020 plus interest after inflation adjustment at an assumed rate of five percent per year.
Vodacom had offered to pay Mr Makate Sh400 million (R47 million) for his innovation, but he rejected the offer claiming it was unfairly determined by Vodacom’s CEO and moved to court to demand more compensation.
The ‘Please Call Me’ service, commonly known as ‘flashback’ in Kenya, is today one of Vodacom’s most prominent features, used by its telcos in seven African countries.
Mr Makate moved to court in 2008 claiming he came up with the idea but was not paid for it. After an eight-year legal battle, a court in 2016 determined that he should be paid, but allowed Vodacom CEO to determine the “reasonable” amount he should be paid, after negotiations. The innovator rekindled the court battle in 2021 after he rejected the R47 million offer by Vodacom and the appellate court has now agreed with him that the CEO unfairly determined the amount.
“The second respondent’s Determination of Reasonable Compensation due to Mr Kenneth Nkosana Makate arising from the Please Call Me Idea, dated 9, January 2019, is reviewed and set aside,” the court said.
Vodacom owns 35 percent of Kenya’s leading telco, Safaricom, and 6.2 percent of its subsidiary in Ethiopia. It is also the principal shareholder of Vodacom Tanzania, the Democratic Republic of Congo, Lesotho, and Vodafone in Egypt. It also operates telcos in Lesotho and Mozambique.
While the court ordered the firm to determine the compensation for Mr Makate within 30 calendar days, they have indicated that they will appeal the decision to the Constitutional Court, South Africa’s highest court.
Read: ‘Please call me’ inventor to get 5pc pay of Vodacom revenue
“Vodacom notes the judgment of the Supreme Court of Appeal of South Africa (Supreme Court) in the case of Vodacom (Pty) Ltd v Makate (Please Call Me matter)…Vodacom is surprised and disappointed with the judgment and will bring an application for leave to appeal before the Constitutional Court of South Africa (Constitutional Court), within the prescribed period,” said Vodacom.
