The case between WirelessG, the Wi-Fi hotspot specialist, and Vodacom, South Africa’s leading mobile operator, is escalating as an agreement between the two cannot be reached.
Wireless G is set to challenge Vodacom in court over claims the mobile operator dishonoured a shareholding agreement, which is supposed to grant WirelessG exclusivity regarding any infrastructure for Wi-Fi Vodacom intends to operate or construct.
A lot hangs on resolution of the problem for WirelessG. HumanIPO reported earlier today WirelessG had announced South African Black Economic Empowerment (BEE) consortium Mightycare Mosegedi are to buy a 26 percent stake in mother company G-Mobile Holdings, though the R48.5 million (US$5.5 million), though it will only go through once the dispute with Vodacom is resolved.
Vodacom owns 26 percent of WirelessG, which believes Vodacom is backtracking on the agreements since the mobile operator realised a strategic opportunity of significance in data offloading onto Wi-Fi through its mobile broadband network.
WirelessG apparently sold the 26 percent stake to Vodacom at a discount of 49 percent for an exchange of various exclusivity and commercial rights.
According to WirelessG, Vodacom has entered into talks with companies WirelessG considers as rivals for the past 10 months. WirelessG is also accusing Vodacom of piloting Wi-Fi related projects without the involvement of WirelessG.
Vodacom denied a breach of the shareholders agreement and any collaboration with WirelessG’s rivals in court documents. However, its parent company, the UK-based Vodafone has entered into talks to provide public Wi-Fi hotspots.
Now the two companies are pointing fingers at each other with WirelessG calling Vodacom “incompetent” among other things and Vodacom lashing back saying WirelessG’s legal challenge against them indicates desperation as they attempt to save their business.
Vodacom maintains a first right of refusal clause in the said agreement does not extend past public Wi-Fi spots and infrastructure Vodacom might build.
The operator argued in an affidavit that WirelessG’s application to the court is a means it is using to impose itself on Vodacom as well as areas of the mobile operator’s business where no obligation to involve WirelessG exists.
Furthermore Vodacom has issued notice it will terminate the binding and retailer agreements with WirelessG. The agreements are set for expiration at the end of this month which Vodacom believes will restrict WirelessG’s cash flow.
The agreements that are to expire included a guarantee of monthly revenue for WirelessG to the tune of R250,000 (US$28,000) as well as a monthly fee of R50,000 (US$5,604). Essentially Vodacom believes this is what the case is all about – the money WirelessG will no longer receive from Vodacom.
Vodacom added the agreement was essentially bad for business because the demand for WirelessG’s Wi-Fi spots were not accommodated and Vodacom’s selling Wi-Fi products in accordance with the retailer agreement only made R20,000 (US$2,241).
This meant the revenues never reached a point that would generate net profits now would it release Vodacom from paying the revenue guarantee. According to Vodacom this equates to a total of R18 million (US$2 million) of five years’ worth of monthly payments.
The case is due to be heard by the high court in April.