How much Vodacom should pay Please Call Me’s Makate – and it is not R20 billion

Vodacom’s Ideation programme, which provides employees with an incentive to pitch their ideas to the company, offers compensation of up to R1 million.

This means that Kenneth Nkosana Makate, who proposed a ‘free missed call’ idea called Buzz to Vodacom, should receive no more than R1 million.

The prolonged Please Call Me battle made headlines again after the Supreme Court of Appeal (SCA) upheld a High Court ruling regarding compensation to Makate.

The SCA backed the High Court’s ruling that Vodacom must pay Makate between 5% and 7.5% of the total voice revenue generated by the Please Call Me product over 18 years, plus interest.

Makate’s legal team calculated that Vodacom generated R205 billion over 18 years through PCM. Adding interest, Makate wants around R20 billion from Vodacom.

Vodacom CEO Shameel Joosub previously used four different models that could have been used to determine Makate’s compensation, ultimately offering him R47 million.

Makate approached the High Court, arguing he was entitled to billions. In February 2022, Judge Wendy Hughes ruled in favour of Makate.

She was persuaded by Makate’s team’s arguments, saying he was entitled to at least 5% of all PCM revenue for around two decades.

Vodacom appealed this ruling but lost its case in the SCA. It is now approaching the Constitutional Court to get out of this pickle.

Most of Vodacom’s pain is self-inflicted. For one, it handled the compensation like Makate was a service provider with a 5-year contract.

The High Court ruling states that Joosub was disingenuous to project that “Please Call Me, as a third-party service provider, should only be allocated a duration of five years”.

The statement is preposterous. Makate was an employee who proposed an idea called “Buzz” to Vodacom – nothing more.

The Buzz idea was also not for a Please Call Me SMS service. It was for allowing a user without airtime to dial a phone number and give a “missed call”.

As it turned out, Makate’s proposal was not technically possible since a call could only mature to a ringing state if the user had credit. Consequently, the proposal did not progress beyond an idea.

Please Call Me was actually invented by Legal expert Ari Kahn, who invented and patented it on behalf of MTN.

When Vodacom launched Please Call Me two months after MTN in March 2001, it faced legal threats of patent infringement from MTN.

Makate did not invent Please Call Me. Instead, he came up with an idea that, at best, resulted in Vodacom launching a service that was a carbon copy of what MTN launched two months earlier.

“So regardless of what he proposed it had no commercial value because MTN had established Prior Art and the service was already publicly disclosed before Vodacom launched,” said Kahn.

“Had Makate not proposed anything, nothing would have changed. MTN would still have the patent and IP rights and launched first. And Vodacom would have simply followed by copying the service.”

Vodacom Ideation programme

Vodacom CEO Shameel Joosub

All the Makate did was pitch his Buzz idea to Vodacom in November 2000. He did not develop the service, file for a patent, or serve as a service provider.

Therefore, the discussion around Makate’s compensation should focus on what companies pay for ideas.

As it turns out, Vodacom has a programme which compensates employees for pitching their ideas to the company.

The Vodacom Ideation programme encourages employees to come up with ideas to help the company, with an annual prize pot of up to R1 million after tax.

The allocation per winner and runners-up can vary. First-place winners have previously received R500,000 after tax on several occasions.

To pitch their idea, Vodacom employees email an outline of their proposal to the head of the company’s innovation department, Jannie van Zyl.

After the innovation department receives employees’ ideas, a formal review panel at Vodacom assesses them to see if they are commercially viable.

Once the idea has been accepted and formally implemented, the idea and idea originator are entered into the annual innovation competition.

This process closely resembles what Makate did when he pitched his idea to buzz someone else’s phone without airtime to a superior in November 2000.

Makate was not involved in the development or launch of the product. However, his manager had promised him compensation for the idea.

Since there was a well-established programme in Vodacom to compensate employees for ideas, Joosub should have stuck to this programme for Makate’s compensation.

His task, as described by the Constitutional Court, was to establish where Makate’s idea would have ranked on the Vodacom Ideation compensation scale.

He could then offer Makate a reward of up to R1 million based on his findings and add interest to arrive at a final figure.

Instead, the team at Vodacom opened a can of worms when they used models which do not apply to this case. It arrived at an arbitrary figure of R47 million. Of course, it could be challenged.

All of a sudden, concepts like “third-party service provider”, “contract period”, and “percentage of revenue” entered the discussion.

Makate proposed an idea. He did not have a revenue share contract with the mobile operator as a third-party service provider. No Vodacom employee does.

So, calculating compensation for an idea based on such an assumption is misguided. However, Vodacom played into Makate’s hands by going down this path.

Vodacom explains

Vodacom spokesperson Byron Kennedy said the Constitutional Court ordered the company in April 2016 to start negotiations with Kenneth Nkosana Makate.

These negotiations had to be conducted in faith to determine reasonable compensation payable to him in terms of the agreement.

During these negotiations, Vodacom considered various options, including Vodacom’s existing compensation structure. It resulted in an offer of R10 million.

Given that negotiations broke down, in line with the April 2016 Constitutional Court order, the matter was submitted to Vodacom CEO Shameel Joosub to determine the amount. 

As a deadlock breaker, Joosub detailed four models, including an employee model, in arriving at his R47 million determination in January 2019.

In a nutshell, these models are:

  • 2001 looking forward model – R51.5 million
  • Employee model – R21.8 million
  • Time Window Lock – R38.1 million
  • Revenue Share Model – R42.2 million

In the end, Joosub used an average of the two highest numbers and rounded this up to formulate his R47 million determination.

These models were exceedingly generous, as Makate only shared an idea with his former employer. He did not do anything else.

Vodacom explained that it initially offered Makate R10 million, which was rejected. Joosub, therefore, opted for other models to try to break the deadlock.

This is an opinion piece.