Fixed-line operator Telkom could be liable for a claim if a Nigerian company is successful in being awarded more than $10 million in damages.
African Prepaid Services Nigeria (APSN), in which local firm Blue Label Telecoms has a 36.7% stake, is claiming damages of $481.2 million (R4 billion) against former Telkom subsidiary Multi-Links.
Multi-Links has counter-claimed and is seeking a $123.9 million (R1 billion) award.
The dispute hinges around a super-dealer agreement which Multi-Links terminated with APSN last November. Telkom sold Multi-Links last month for R68 million, but says it has guaranteed to accept liability for certain litigation claims against the Nigerian unit if the claims come in at more than $10 million, or about R84 million.
“It is considered not to be probable that the claims will exceed the $10 million,” Telkom says. Arbitration is set down for hearing from 5 November 2012 until 14 December 2012.
Last November, Blue Label's Nigerian unit threatened legal action over lost profit, because the 10-year “super-dealer agreement” was cancelled early after Telkom decided to exit the struggling Multi-Links CDMA business.
Blue Label has since exited Nigeria, but still has a stake in APSN, which continues to exist while arbitration is pending, explains investor relations head Michael Campbell. He could not comment further as the matter is sub judice.
Joint-CEO Mark Levy said when the company exited the West African country, the move would “enable Blue Label to redeploy resources to our other international businesses, in particular India and Mexico”.
Blue Label has a 36.72% stake in APSN through its 72% ownership of APS, which owns 51% of the Nigerian company. APS distributes bulk printed physical prepaid products and starter packs.
APSN's contract with Multi-Links 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 period until December 2018.
Multi-Links defended its decision to cancel its contract, saying last year there were a number of contractual breaches by APSN, which has filed its defence against Multi-Links' counter-claim.
Telkom does not comment on pending legal action.
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