Vodacom vs WirelessG: billion rand blunder or storm in a teacup?

WirelessG and six other applicants have filed an urgent court application against Vodacom, arguing that Vodacom is not in compliance with its shareholding agreement with WirelessG.

The court application focusses on three main issues, which WirelessG argues is costing them millions in lost revenue and damages.

  • Vodacom is not permitted to provide Wi-Fi independently from WirelessG – WirelessG said that Vodacom is offering Wi-Fi services, and is using other companies to offer Wi-Fi without giving them first right of refusal as agreed upon;
  • Vodacom is obliged to offer WirelessG`s Wi-Fi as an integral part of its data bundles – Vodacom is not doing it, which Wireless said has cost them R174 million, to date, and R7 million per month;
  • Vodacom has to provide WirelessG with a data pricing equal to Vodacom’s best wholesale data price – WirelessG said that this is not happening, which has caused damages of R20.5 million and counting

The matter is set to be heard in court next month, but both parties said that they would prefer a negotiated settlement.

The case poses risks to both sides and, according to industry experts, the two companies may be well advised to reach a settlement rather than to spar in court.

Vodacom and WirelessG should reach a settlement: Goldstuck

Arthur Goldstuck
Arthur Goldstuck

World Wide Worx MD, Arthur Goldstuck said that it is in both parties’ interests to reach a settlement.

“WirelessG is a strategic asset for Vodacom, but one that it hasn’t exploited. On the other hand, the Vodacom footprint is a key element in WirelessG’s roadmap, so it wouldn’t want to harm the relationship irrevocably,” said Goldstuck.

“It appears that Vodacom did take its eye off the Wi-Fi ball for some time, but it is surprising that they wouldn’t want to sit down and thrash out a mutually agreeable solution.”

Goldstuck added that the terms of the initial contract are surprising. “Given that wireless hotspot services have a different business rationale than Wi-Fi offload, it may not be ideal to have both in the exclusive hands of one company,” said Goldstuck.

“Both parties must acknowledge that the market has evolved to a point where they must rethink the approach, without harming WirelessG’s business interests.”

Vodacom picks its battles: Neilson

Brian Neilson
Brian Neilson

BMI-T director, Brian Neilson said that Vodacom picks its battles, and “clearly this one is worth picking, as the stakes are so high in light of the global trend towards Wi-Fi offloading”.

Neilson explained that traffic offloading to Wi-Fi networks will include VoIP traffic which will be a partial revenue substitute for traditional voice calling.

“Even if this is not considered, the mobile IP data market alone is already worth close to R5 billion a year for Vodacom alone and this could double in future,” said Nielsen.

“If 20% of this is attributed to offloading to Wi-Fi networks, assuming it can be tariffed similarly, that could be worth R2 billion in about 6 years’ time.”

Neilson said that buying out the other shareholders of WirelessG may be an option to consider for Vodacom – depending on the financial trade-offs involved.

“They might wait out the court battle to see what the outcome is before reaching such a decision, or reach a settlement at the last minute before final judgement is handed down,” said Neilson.

Vodacom versus WirelessG not a big deal: Schussler

Mike Schussler
Mike Schussler

Well-known economist, Mike Schussler said that, while he does not generally deal with firm data, he suspects that this is a small fight for Vodacom and a big fight for WirelessG.

“I think Vodacom can keep a court battle going for quite some time,” said Schussler. “WirelessG could keep things going too but not as long as Vodacom.”

Schussler thinks that Vodacom would probably just pay a fee to get out of an exclusive deal that now no longer seems to suit them.

“The economy will not flinch – I promise – as a result of this fight,” Schussler quipped.

More Vodacom and WirelessG articles

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Vodacom vs WirelessG: billion rand blunder or storm in a teacup?