How billionaire Johann Rupert helped start Vodacom

Vodacom was co-founded in 1993 as a joint venture between state-owned Telkom, UK-based Vodafone, and Johann Rupert’s Rembrandt.

Telkom owned 50% of the company, Vodafone held 35%, and Rembrandt had 15%.

Rembrandt’s history dates back to 1948, when Johann Rupert’s father, Anton Rupert, established the tobacco company Voorbrand.

Rembrandt was listed on the Johannesburg Stock Exchange (JSE) in 1956. Since the 1970s, the company rapidly expanded its interests.

The company diversified from tobacco and alcohol through investments in banking, financial services, mining, printing and packaging, medical services, engineering, and food.

Vodacom officially launched in 1994 with the first GSM network in South Africa, and one of the first on the continent.

Its shareholders recognised the need for BEE investors and, in 1996, sold a 5% stake to Hosken Consolidated Investments Limited (HCI) for R118 million.

In September of 2000, Rembrandt restructured by collapsing its South African holding structure from four listed companies into two, namely Remgro and VenFin.

VenFin housed its telecommunications and technology companies like Vodacom, while Remgro represented Rembrandt’s established tobacco, financial services, mining and industrial interests.

In 2001, a huge dispute erupted between Vodacom and MTN over a patent for a service that would one day be called “Please Call Me”.

MTN received its patent on 22 January 2001 and launched its version of the service, “Call Me”, shortly after that.

Call Me allowed subscribers to send a free SMS message to another cellular user, asking them to call back.

Vodacom responded by launching a carbon copy of MTN’s service on 15 March 2001 — also named Call Me. It would only be renamed later.

MTN immediately notified Vodacom that it was infringing on its Call Me patent.

While there were a few heated exchanges between the two companies, MTN curiously decided not to enforce its patent rights.

This was because VenFin jumped in. Its parent company and MTN shared the same law firm — Spoor and Fisher.

The powerful Rembrandt Group used its influence and connections through Spoor and Fisher to convince MTN to drop the case.

When MyBroadband previously asked MTN about this, the operator said that in 2001, it was focused on developing the sector and driving mass participation by South Africans.

“Patent law is extremely complex, and MTN was not inclined to enter into a drawn-out litigation on this service that aimed to keep South Africans in contact,” MTN said.

However, that wouldn’t be the last Vodacom heard about Please Call Me.

Many years later, the man credited with coming up with the idea at Vodacom, Kenneth Nkosana Makate, would launch legal action demanding compensation, which he said he had been promised.

Makate won in the Constitutional Court in 2016, but the case drags on to this day as he and Vodacom battle over how much he is owed.

Following the patent dispute in 2001, HCI sold its 5% stake in Vodacom back to Vodafone and VenFin for R1.5 billion in 2002.

It made a 1,171% profit on the transaction, making it one of the most lucrative BEE deals in history.

In 2006, VenFin sold its Vodacom stake for around R16 billion after a bidding war between Telkom and Vodafone. Vodafone won.

The deal wasn’t straightforward, with Vodafone buying the whole VenFin for R21 billion, after which Rembrandt would buy back its other investments for R5 billion through a separate legal entity and reconstitute the company.

VenFin’s other holdings included E-tv owner eMedia, Dimension Data (now NTT Data), FrontRange, Idion, Tracker, and Alexander Forbes.

Johann Rupert explained at the time that it would have been difficult for VenFin to sell its Vodacom shares separately and return the cash to shareholders in an effective way.

Vodacom listed on the JSE in May 2009, which also marked Telkom’s exit from the company.

In November 2009, Remgro and VenFin merged, adding media and technology interests to Remgro’s investments.

Today Remgro has interests in numerous South African companies in banking, financial, healthcare, freight, food, entertainment, and telecoms.

It still owns a stake in eMedia, while its telecoms holdings include Vumatel, Dark Fibre Africa, and Seacom.