Telkom and Multi-Links, until a few years ago its Nigerian subsidiary, have instituted action against prepaid voucher distributor Blue Label Telecoms, claiming $724 million on an alleged misrepresentation by Blue Label.
Telkom and Multi-Links are also alleging there were breaches of fiduciary duties by an unnamed former senior Telkom executive, at the time the agreement was concluded with a Blue Label subsidiary in 2008. The former executive is being sued for $6 million.
Blue Label, which has also instituted arbitration against Multi-Links after its 10-year deal was cancelled early, is confident the claims made against Blue Label, its subsidiaries and representatives will be successfully defended. "As the arbitration and legal proceedings are sub judice, no further statements may be made about the merits at this stage."
Telkom says in its annual results that its $528 million damages claim is based on a breach of a duty of care and misrepresentations made by Blue Label at the time that the deal was concluded with Multi-Links. The claim against the former senior executive of Telkom is based on a breach of his fiduciary duty owed to Telkom and Multi-Links.
Multi-Links is also claiming several million dollars for damages suffered. In addition, the court has been asked to declare the deal null and void.
Drawn out battle
In December 2008, Africa Prepaid Services, a subsidiary of Blue Label, concluded a super-dealer agreement with Multi-Links Telecommunications, which was then a subsidiary of Telkom, to distribute a range of products for 10 years.
In November 2010, the Blue Label subsidiary cancelled the agreement, arguing that Multi-Links wrongfully repudiated the deal. In June 2011, Africa Prepaid Services launched arbitration proceedings against Multi-Links, claiming $457 million, while Multi-Links has counter-claimed $123 million.
Telkom sold Multi-Links to Hip Oils Topco in October 2011 and made a net R1 billion loss, but has agreed to be liable to pay out if Africa Prepaid Services' claim is successful and it is awarded more than $10 million.
Arbitration, meant to start last November, was postponed to next February.
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