Vodacom is pinning its hopes on the apex court to overturn a Supreme Court of Appeal (SCA) ruling as it tries to avoid parting with billions in the protracted “Please Call Me” (PCM) legal battle.
Vodacom filed papers in the Constitutional Court this week as it seeks to set aside the SCAs ruling which ordered the mobile telecommunications giants to make a fresh determination within 30 days to compensate Nkosana Makate for his invention.
The SCA set aside the R47m offer made by CEO Shameel Joosub which Makate rejected in January 2019.
In court papers, seen by TimesLIVE Premium, Vodacom’s chief officer for legal, compliance and risk, Nkateko Nyoka, stated in his founding affidavit that the SCA judgment would “entitle Mr Makate to amount of something between R29bn and R63bn”.
Vodacom’s market capitalisation is about R200bn. A payment of R40bn would mean 20% of Vodacom's total market capitalisation
— Nkateko Nyoka, Vodacom’s chief officer for legal, compliance and risk
“The majority judgment, if left undisturbed, will moreover have a profound impact on Vodacom, its shareholders, its suppliers, its customers and the societies in which it operates,” said Nyoka
It cited the SCA’s minority judgment which placed Makate’s compensation at about R186m.
“The majority, however, did not merely dismiss Vodacom’s appeal. It went in to set aside the high court’s orders and replace them with all the orders Makate had sought in the high court,” said Nyoka.
Vodacom argued that what Makate had sought in the high court was not an issue that the SCA should have looked into.
“The majority orders were accordingly beyond its jurisdiction, in breach of the rule of law entrenched in section 1 (c) if the constitution, and in breach of Vodacom’s right to a fair hearing in terms of section 34 of the constitution,” said Nyoka.
In a ruling penned by SCA judge Ashton Scheepers, the Pretoria high court ruling was upheld, with Vodacom granted a month to “determine the amount of reasonable compensation due to” Makate in accordance with Vodacom CEO Shameel Joosub’s four models of January 2019 “solely on the basis that the second respondent [Joosub] would have awarded the applicant a contract for 18 years, commencing on March 1 2001 and terminating on February 28 2019”.
If the apex court agrees to hear the matter, this would be the second visit. In April 2016, the Constitutional Court ruled that Vodacom was bound to an agreement that Makate had with the company’s then-director of product development, Phillip Geissler.
The court ordered Vodacom to begin negotiations with Makate for a reasonable payout to compensate him, leading to the R47m offer he rejected.
Nyoka said the minority judgment of the SCA had disagreed with Joosub’s calculation on a single aspect which was “on the basis of a five-year contract instead of 18.
“While Vodacom does not agree with all the findings of the minority, it is a careful, considered and substantially accurate account of the issues between the parties and their evidence relating to submissions on those issues.”
He said the minority view made “for a useful comparison with the majority judgment. The comparison shows that the majority overlooked or ignored many of the issues between the parties and their evidence and submissions relating to those issues. The comparison thus highlights some of the fatal flaws in the majority judgment.”
Nyoka argued that the majority decision that Makate was entitled to between 5% and 7% of revenue generated from Please Call Me was “flawed and hopelessly vague” and that it would make the inventor entitled to up to R63bn.
“The payment of R40bn to Makate would negatively impact on Vodacom’s shareholders, market capitalisation and equity value. Vodacom’s market capitalisation is about R200bn. A payment of R40bn would mean 20% of Vodacom’s total market capitalisation.”
Vodacom’s annual dividend payments to shareholders is about R13bn to R14bn and that a R40bn would equate three years of dividends, he said.
“The drop in the market capitalisation will have a direct impact on Vodacom’s major institutional investors who manage money on behalf of pensioners. For example, the Public Investment Corporation [PIC] directly owns 11.6% of Vodacom Group.”
Approached for comment, Makate said he felt the move to the ConCourt seemed like “a long shot for Vodacom as there's no constitutional matter in what they have raised” in their papers.
“While I don’t like to litigate in the media like Vodacom has been doing. I think the Constitutional Court will rightly dismiss this as there’s no constitutional issue,” he said.
On Vodacom arguing that if the SCA ruling is not challenged it would greatly impact shareholders, community and all its markets, Makate said: “There’s nothing catastrophic about what the SCA has done. I mean, if you are owing a person for over two decades 5% of revenue share, it will be a big sum. With PCM’s success, it’s a hugely successful product.”
Makate said 5% should not represent a catastrophe to Vodacom, which has for two decades kept 95% of the revenue generated from his invention.
Makate said Vodacom’s application had no merit.
“They have failed to advance any constitutional point to get access to the court. To suggest the impact of the matter to investors is misleading and an attempt to shift the court from a pure commercial dispute matter which falls outside the ConCourt’s ambit.”
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