‘Vodacom walked all over us’

Wireless access provider WirelessG has taken Vodacom to court, claiming the operator has breached an exclusivity contract for Wi-Fi services potentially worth millions of rands. By Craig Wilson.

Carel van der Merwe

Carel van der Merwe

Vodacom is facing a court challenge from Wi-Fi specialist WirelessG, which claims the mobile operator, South Africa’s biggest, has reneged on a shareholder agreement that grants its partner exclusivity over any Wi-Fi infrastructure Vodacom wants to build or operate.

WirelessG CEO Carel van der Merwe tells TechCentral that Vodacom — which owns 26% of the company — has begun to backtrack on the agreements between the parties after it realised that “data offloading” onto Wi-Fi from its mobile broadband network was becoming a significant strategic opportunity.

He claims Vodacom has held discussions with a number of WirelessG’s rivals in the past nine months and also ran pilot Wi-Fi projects late last year without involving WirelessG.

“We saw that the spirit of the agreement was not being adhered to. We approached Vodacom’s executive team and asked them to honour the agreement,” Van der Merwe says. “They asked that we relinquish exclusivity before negotiations.”

WirelessG sold the 26% stake in the company to Vodacom at a 49% discount in exchange for various commercial rights, including exclusivity rights for providing Wi-Fi services and infrastructure, he claims.

“My shareholders paid for those rights. There was a request for a discount to the share price, which, five years ago, amounted to around R30m. Five years ago, Wi-Fi was a poor cousin of connectivity technologies, but now it’s become important and there’s money to be made.”

When Vodacom bought the stake in WirelessG, it told the company that it did not have time and resources to focus on new technologies like Wi-Fi and saw the value in getting WirelessG to “conduct research, deploy services, and present them with opportunities and differentiators”.

“Vodacom wanted to focus on 3G because the company felt it could make money there. Now that Wi-Fi is becoming important, they want to ignore our agreement and walk all over us.”

WirelessG has spent the past eight months trying to negotiate with Vodacom, according to Van der Merwe. “We escalated the matter to [then-CEO] Pieter Uys and to [current CEO] Shameel Joosub and we were promised there would be commitments about how the company was going to execute the shareholders’ agreement. That deadline hasn’t been met.”

Van der Merwe says he hopes the matter can be settled amicably, but that Vodacom has given no indication it intends doing so. “We want an irrevocable commitment about implementation plans and timelines.”

MyBroadband, a consumer forum website which carried a report on the dispute on Thursday morning, quoted Van der Merwe as saying that Internet Solutions had been commissioned to offer Wi-Fi services to Vodacom, in contravention of the mobile operator’s agreement with WirelessG. Internet Solutions MD Saki Missaikos denies this, saying in a terse statement in response to a query from TechCentral that the Dimension Data-owned company is “not providing any Wi-Fi services to Vodacom”.

Van der Merwe says WirelessG’s court papers contain a strategic document from Vodacom parent Vodafone indicating that it wants to extend its Wi-Fi offerings to the South African operator. These offerings include its international Wi-Fi hotspots, some of which include Internet Solutions’ infrastructure.

Vodacom spokesman Richard Boorman confirms it received an urgent court application from WirelessG last month but won’t comment as doing so “may prejudice the case”.

“We’re in the process of compiling a response, which is due on 11 February. The matter is then set down for hearing on 11 March.”

Boorman says Vodacom believes it has a strong defence but would prefer to reach an agreement out of court.  — (c) 2013 NewsCentral Media

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