Telkom's Nigerian subsidiary, Multi-Links, said its decision to cancel its contract with listed prepaid distribution company Blue Label is based on a number of breaches committed by the company's subsidiary, Africa Prepaid Services Nigeria (APSN).
APSN had a “super dealer agreement” with Multi-Links, which allowed it to acquire customers for Multi-Links' CDMA network, as well as sell and market the range of Multi-Links' CDMA service and products for an exclusive 10-year period, until December 2018.
Multi-Links' decision to terminate the contract will be fought by Blue Label, which announced its intentions to take legal action against Multi-Links over the profit it will lose out on.
“Multi-Links' purported termination of the agreement is unlawful and constitutes a repudiation of its obligations in terms of the agreement. This wrongful repudiation has been accepted by APSN, which has cancelled the agreement,” the company stated.
“APSN intends to institute legal proceedings for the recovery of damages it has suffered, and will continue to suffer, as a consequence of Multi-Links' wrongful repudiation of the agreement,” continued the company. The amount of damages has not yet been quantified.
But Multi-Links stands firm on its decision to terminate the contract, arguing that APSN is guilty of breaching the contract. The company would not discuss the nature of the breaches ahead of pending legal action.
Ijeoma Abazie, chief corporate affairs officer of Multi-Links, says: “It would be inappropriate for Multi-Links to comment on the breaches committed by APSN at this stage. Suffice to state that, as a result of breaches by APSN, Multi-Links cancelled the agreement with APSN.”
Blue Label would not comment on the allegations for fear of prejudicing forthcoming legal proceedings.
Amid turmoil
This comes as Multi-Links prepares for a rocky future following Telkom's decision to pull out of the CDMA arm of the business. The telco is currently evaluating bids for Multi-Links' CDMA business.
Telkom spent about R3.2 billion buying into Multi-Links between May 2007 and January 2009.
Multi-Links has been problematic, as it struggled to become profitable, and Telkom has written down the value of the unit by more than R5.6 billion.
Exiting the CDMA side, which accounts for about 90% of Multi-Links' revenue, could cost Telkom up to R1.3 billion.
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