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James Herbst, CEO of Huge Group
Relations between cell C and his future client Huge Group has hit rock bottom, with the first claiming that the second owes him R60 million and the second saying that he is actually owed money “morally”.
The two parties have now entered a second phase of arbitration to resolve the bitter dispute, with both parties accusing each other of acting in bad faith.
The latest developments in the long-running saga, which has dragged on since the beginning of 2019, come after the Johannesburg High Court ruled last week against Huge Cellular’s attempt by a subsidiary of Huge Group to seek an injunction. Urgent action against the service provider company Cell C. for the interruption of services, which could affect more than 20,000 customers, mainly small and medium-sized companies.
Both parties are breathing fire, and Huge Group CEO James Herbst told TechCentral on Wednesday that the mobile operator received a “windfall of R60 million at my expense,” while Cell C’s chief executive for retail sales The eldest, Björn Flormann, accused Huge of getting a free ride. in the infrastructure of the company for more than a year without paying the debt for the services provided.
Cell C now claims around R60 million from Huge Group through arbitration (the dispute resolution mechanism agreed in the contract). Meanwhile, Huge Group argues that instead of owing Cell C R60 million, the mobile operator owes R4 million. This, he said, is because, in his view, he had already prepaid purchased wholesale airtime that hadn’t been used when an “enterprise supply agreement” (ESA) between the parties was terminated in February 2019. Cell C argues Enorme Group lost that airtime when the contract ended, a point Huge Group lost in an earlier phase of the arbitration.
Withering judgment
The courts have had a poor opinion of Huge Group’s claims, with the high court last week delivering a damning and withering judgment against an urgent application filed by the company, accusing it of wasting the court’s time.
Huge brought the request to try to prevent Cell C from canceling its services after losing the first phase of arbitration in April. In a previous ruling, the higher court had entered an injunction in favor of Huge Group, but only on the basis that the company had agreed to pay for the services provided by Cell C if it lost the arbitration.
The judge determined that, “in a nutshell,” Huge Group “did not advance any legally viable basis to avoid paying the amount it promised to pay for the interdiction period.”
The court dismissed the request with costs.
Cell C CEO for Björn Flormann Wholesale
Herbst told TechCentral that Huge Group will now withdraw another legal challenge in higher court and seek to resolve the remaining dispute, over who is owed what, through the arbitration process.
The company has concluded a new agreement with Cell C rival MTN South Africa and will endeavor to transfer all of its affected customers to MTN by October 17, the date on which Cell C has said it will terminate its relationship with Huge Group. forever.
However, that is going to be tricky, given that more than 45,000 Sim cards deployed in devices across the country will have to be exchanged manually and their numbers transferred to the MTN network. Herbst said MTN is providing great support on the move.
The contract between Cell C and Huge Cellular was originally signed in February 2017. The five-year contract consisted of an initial period of two years followed by a renewal period of three years.
According to Herbst, Huge agreed in the first period of the contract to pay 125 million rand, divided into uneven or “sculpted” monthly payments. Under the deal, purchased unused wholesale airtime would be carried over in perpetuity, he said. This unused airtime quickly piled up, to the point where Huge was worth R60 million at the time it was canceled, Herbst said. Given this, it would have been irresponsible for the company to commit to the second phase of the agreement, which would have involved paying R250 million in three years. The parties were unable to agree on new terms.
Arbitration
Huge, fearing losing access to Cell C’s network, he then went to court and secured an injunction to allow him to continue using the network, and accumulated airtime, until the arbitration between the parties was concluded. Huge Group lost the arbitration in April 2020, and Cell C now wants the company to pay for provided airtime between March 2019 and March 2020, saying the unused airtime disappeared when the contract was terminated.
“In the Cell C version, we operate on your network for free. In my version, we were using what we had already paid for, ”Herbst said. Although Huge Group lost the arbitration, it argues that “on a moral level”, Cell C should have honored the fact that Huge had paid for the airtime. Huge has continued to prepay Cell C an amount of R3 million since April, when it lost the arbitration process, to ensure continued access to the network. However, Cell C insists that following the high court ruling last week, the deal will be completely rescinded on October 17.
Cell C Chief Legal Officer Zahir Williams told TechCentral on Wednesday that Huge Group “made deliberate decisions taking into account the impact of those decisions on our relationship.”
“The way they have behaved, those decisions reflect badly on Huge. It eroded the minimum level of trust and goodwill that must exist to continue doing business. It not only eroded it, it destroyed it. “
Williams said Cell C always seeks to build “long-lasting, fruitful and harmonious relationships with its clients.” This, he said, became impossible with Huge Group.
Flormann, the wholesale chief executive, said the company could have terminated Huge Group’s access to its network in April when it lost arbitration, but chose not to do so in an effort to salvage the relationship. But the dispute over the 60 million rand could not be resolved.
It emphasized that Huge Group explicitly stated in its initial application to the superior court that if it succeeded in its injunction, it would pay for services during the interdiction period if it lost the arbitration. He has broken his word, Flormann said, even after Cell C offered him a “massive discount”, offering to settle the matter for R30 million. – © 2020 NewsCentral Media
