EWI to go ahead with $1.8bn claim against Vodacom

Johannesburg, 04 Jun 2004

Despite its much-publicised withdrawal from Nigeria, Vodacom may still find itself liable for a damages claim of around $1.8 billion, brought against it by Econet Wireless International (EWI).

EWI says that it will not withdraw the application it has brought against Vodacom for inducement of breach of contract, which is currently before the Nigerian High Court.

The company has brought this action because it claims that Vodacom had already been made aware of its pre-emptive rights to shares in Econet Wireless Nigeria (EWN, now called Vee Networks), but that the mobile operator chose to disregard this and make its own offer for shares in the Nigerian operation.

In a release explaining the background to the case, EWI CEO Strive Masiyiwa said that when Vodacom first approached EWN to buy shares in that company, he personally went to see Vodacom`s deputy CEO, Andrew Mthembu, to advise him that there was already an existing agreement between EWN and EWI regarding the shares.

"Mthembu gave an undertaking that Vodacom would not get involved if he received proof of the agreement between EWI and EWN. After he signed a confidentiality and non-disclosure agreement, he was given a copy of the relevant documents," says Masiyiwa.

"It thus came as quite a shock for us to learn that Vodacom had subsequently made an almost identical counter-offer for the Nigerian company."

Masiyiwa says that the withdrawal of Vodacom from Nigeria and the dismissal of Mthembu will have no bearing on the case.

"Although Mthembu was the principle player in the inducement by Vodacom, he did so in his capacity as deputy CEO of the group," he says.

"We believe he will be called as a witness and will be compelled to come to Nigeria and explain Vodacom`s actions, otherwise we will expect Alan Knott-Craig to appear in Nigeria as a witness. The dismissal of Mthembu does not absolve Vodacom."

The next hearing in the matter has been set for 17 June, when the presiding judge will rule on an application by Vodacom for leave to file further affidavits.

According to Kevin Kachidza, EWI`s head of investor relations and communications, the motivation behind the claim of $1.8 billion is based on a calculation of total damages suffered by the company.

"Amongst the key factors are the monies we feel are due to us from the technical services agreement we had with EWN, which we believe was illegally terminated following Vodacom`s approach," says Kachidza.

"Then there are the profits EWI would have received from EWN`s operation, had we been able to take up the additional shares, as was our pre-emptive right."

"Other factors include capital appreciation, loss of investments secured, loss of staff compensation and the use of our intellectual property and subsequent potential damages to our brand name."