Vodacom, which is already facing earning headwinds, faces reputation and brand damage the longer the “Please Call Me” row continues, according to analysts.
The telecoms group operates in a highly competitive South African environment, fighting for market share with companies such as MTN, Telkom and Cell C, trying to attract consumer spend amid a weak economy.
At least 200 people from the “Please Call Me” Movement gathered outside Vodacom’s headquarters in Midrand yesterday to demand that the telecoms firm pay Nkosana Makate, the inventor of the “Please Call Me”, service compensation.
Vodacom said yesterday that it was willing to engage further with “Please Call Me” inventor Nkosana Makate in a attempt to resolve the long-standing dispute between the two parties.
The constitutional court in April 2006 ordered Vodacom and Makate to negotiate and to agree on reasonable compensation.
Vodacom offered Makate an unknown settlement amount, believed to be in the region of R49million, but it is alleged that he refused to accept the offer.
ANA reported that in one of his affidavits submitted to court in 2015, Makate’s legal team argued that the Please Call Me service had generated R70bn in revenue for Vodacom. Makate’s lawyers said he was entitled to a 15percent share of the revenue as compensation, which was estimated to be up to R10.5bn.
Speaking on eNCA on Thursday afternoon, Vodacom’s head of legal and regulatory affairs, Nkateko Nyoka said the decision of the chief executive was “final and binding”, and that the company was not going to pay anything close to R70bn.
“We certainly not going to go anywhere near R70 billion. Mr Makate’s claim is against Vodacom South Africa and the service revenue of Vodacom South Africa is about R54 billion. If we were to pay R70 billion it means Vodacom South Africa must close shop tomorrow,” Nyoka said, ANA reported.
The group yesterday was forced to close its stores amid a threat of a boycott of Vodacom’s goods and services.
The claim and boycott comes at the back of an unfavourable trading update for the third quarter to end December, which was released last week. In a trading update Vodacom reported that its South African revenue decreased by 0.9percent to R13.9billion.
Nesan Nair, a senior portfolio manager at Sasfin Securities, said the protest would have a negative impact on Vodacom operations. “Social media and negative publicity can hurt a company if customer perception is that the company behaves unfairly,” Nair said.
Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said the Vodacom shutdown related to this issue appeared to be limited to the head office area for now and not the whole country.
“The impact is, therefore, likely to be limited for now, but the issue needs to be resolved sooner to avoid damage to the brand. “Key headwinds related to data pricing, regulation and weaker consumer environment remain so this issue is not helping in that context,” Takaendesa said.
Vodacom’s share price remained unscathed, ending the day 0.72percent higher to close at R120.58 on the JSE yesterday.