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MTN and Seed Media: When a Tiff Boils over
- By Ikem Okuhu
- Published March 22nd, 2011
- BrandWorld
- Unrated
Efforts by the Nigeria Communications Commission (NCC) Nigeria’s telecom regulator and MTN to sanitise sales promos in the sector is yielding results but it is also throwing up contractual obligation challenges between operators and their vendors as is in the case between MTN and one of their service providers, writes IKEM OKUHU.
THE Nigerian telecom environment was an open field. Perhaps due to the unavailability of efficient phone services in the country prior to the launch of GSM services in Nigeria in 2001 or even for reasons of ineffective regulations, telecom operators got to a point where they operated like lottery firms. All manner of lotteries packaged like consumer promos were being sold to Nigerians including those who otherwise would not have solicited for them.
It was so bad that for most Nigerians the operators were simply ripping them off. Some ordinary citizens even blamed the prevalence of lottery in the telecom market on the operators’ understanding of the poverty situation in the country and were therefore positioning to take advantage of the desire by many people to get out of poverty to rip them off via lotteries that were passed off like sales promos.
We did a comprehensive editorial here and it seemed the regulators listened and called the operators to order.
But what is at issue here predates the regulatory intervention we are speaking of. There was an earlier intervention back in 2007 when the authorities stopped some promotional activities of a number of operators on account of weak network capacity. It so happened that MTN was one of these companies.
It so happened that MTN engaged the services of Seed Media for a loyalty programme designed to reward its high value customers. The contract was meant to span from April 1, 2007 to March 31 2008. As early as June of 2007, Seed Media had concluded its part of the mandate and, according to a letter written by MTN to Guaranty Trust Assurance Plc and signed by one Ishmael Nwokocha, payment was meant to be completed.
A look at contract signed between both parties indicates that MTN was to pay Seed Media in five equal tranches, based on work done. Of the N300 million agreed for the transaction, MTN had paid most of it remaining about N60 million. As at this period, all was going well.
But something outside the control of both parties happened. The Nigerian Communications Commission (NCC) sometime in 2007, wielded its axe on the telecom operator. For the NCC, the idea of a promo or loyalty programme (as this was called) was not the most critical issue at the time. The regulators were worried about challenges of network capacity and the attendant call drops that were making call completion a real nightmare for subscribers.
Therefore, the promo was stopped or put better; MTN was forced to suspend the programme. Having invested in making this happen, MTN was bound to lose money, especially since third party contractors such as Seed Media were involved.
In the letter written by MTN to GTAssurance, MTN stated: “We write further to the Advance Payment Guarantee dated 25th day of June 2007 issued by your organisation on behalf of Seed Media Limited in the sum of N60 million. We hereby notify you that Seed Media Limited has completed the contract. In view of this, we approve the discharge of the total sum guaranteed”
Problem arose when MTN would not pay. According information, somewhere along the execution path, MTN allegedly bypassed Seed Media and began dealing directly with its foreign partners, against the terms of the contract. It was alleged that MTN was trying to get this foreign partner to refund payments that had been made on the grounds of non-execution. But late in 2008, this foreign partner, known as TLC Marketing and based in the United Kingdom, allegedly collapsed following the financial crises of the period.
So when there was no TLC to work with, MTN allegedly reverted to Seed Media to enforce the refund. To facilitate this, the telecom operator, in June 2010 engaged the Institute of Chartered Arbitrators to mediate and compel Seed Media to refund payments already made. Consequently, the Institute of Chartered Arbitrators appointed Funke Adekoya (SAN) as Sole Arbitrator. The Arbitration had since commenced seating and has received submissions by both parties.
But Seed Media is saying that MTN appeared to have abandoned the Arbiters and is exploring other options, one of which is the alleged invitation of the Managing Director of Seed Media, Mr. Dominic Essien by the Economic and Financial Crimes Commission (EFCC).
When BusinessWorld got wind of this issue, contact was made to Seed Media and information at our disposal indicate that the company is actually awaiting the decision of the Arbiters before deciding on what next would happen. As far as they are concerned, MTN still owes them the sum of N60 million and employing strong arm tactics would not be the best way to resolve a contractual dispute, the terms and conditions of which are very clear.
According to Seed Media, if Seed Media had not completed its work, what then was the basis of paying four of the five tranches that was agreed in the contract? Again, if there were doubts as to whether or not Seed Media had completed its end of the assignment, why did MTN write the letter to Guaranty Trust Assurance confirming that work has been completed by Seed Media and that the sum in the guarantee be discharged?
Last Wednesday, we wrote to MTN’s Funmi Omgbenigu seeking their own side of the issue. But the mail was returned. We then sought and got the contact phone number of MTN’s External Communications Manager, Mr Andrew Okeleke. Mr Okeleke provided an email path to which we forwarded the mail earlier sent to Funmi.
Some of the things we needed to find out were: if it was true that MTN engaged Seed Media for the loyalty programme; If it was true that MTN was refusing to pay the outstanding balance of N60million following the cancellation of the promo by regulators and after Seed Media had completed their job; If it was true that MTN was refusing to work with the Institute of Chartered Arbitrators they contacted for the peaceful resolution of the matter and instead, went to the EFCC to facilitate refund from the vendor; If it was true that Seed Media had completed its work before the regulators asked that the Loyalty Scheme be discontinued?
Follow up calls and text messages were made on Thursday and we were promised that “someone was working on it” and would revert as soon as he or she was through.
As at the time of compiling this report on Friday evening, MTN had yet to respond. Giving the sensitive nature of this dispute as it relates to what constitutes contractual obligations, we are certain that this is a developing story.
But if the terms of the contract were as clear as Seed Media makes believe, then this entire controversy is needless and should be something the courts can easily resolve. Except there are a few things Seed Media did not see in the fine print.
THE Nigerian telecom environment was an open field. Perhaps due to the unavailability of efficient phone services in the country prior to the launch of GSM services in Nigeria in 2001 or even for reasons of ineffective regulations, telecom operators got to a point where they operated like lottery firms. All manner of lotteries packaged like consumer promos were being sold to Nigerians including those who otherwise would not have solicited for them.
It was so bad that for most Nigerians the operators were simply ripping them off. Some ordinary citizens even blamed the prevalence of lottery in the telecom market on the operators’ understanding of the poverty situation in the country and were therefore positioning to take advantage of the desire by many people to get out of poverty to rip them off via lotteries that were passed off like sales promos.
We did a comprehensive editorial here and it seemed the regulators listened and called the operators to order.
But what is at issue here predates the regulatory intervention we are speaking of. There was an earlier intervention back in 2007 when the authorities stopped some promotional activities of a number of operators on account of weak network capacity. It so happened that MTN was one of these companies.
It so happened that MTN engaged the services of Seed Media for a loyalty programme designed to reward its high value customers. The contract was meant to span from April 1, 2007 to March 31 2008. As early as June of 2007, Seed Media had concluded its part of the mandate and, according to a letter written by MTN to Guaranty Trust Assurance Plc and signed by one Ishmael Nwokocha, payment was meant to be completed.
A look at contract signed between both parties indicates that MTN was to pay Seed Media in five equal tranches, based on work done. Of the N300 million agreed for the transaction, MTN had paid most of it remaining about N60 million. As at this period, all was going well.
But something outside the control of both parties happened. The Nigerian Communications Commission (NCC) sometime in 2007, wielded its axe on the telecom operator. For the NCC, the idea of a promo or loyalty programme (as this was called) was not the most critical issue at the time. The regulators were worried about challenges of network capacity and the attendant call drops that were making call completion a real nightmare for subscribers.
Therefore, the promo was stopped or put better; MTN was forced to suspend the programme. Having invested in making this happen, MTN was bound to lose money, especially since third party contractors such as Seed Media were involved.
In the letter written by MTN to GTAssurance, MTN stated: “We write further to the Advance Payment Guarantee dated 25th day of June 2007 issued by your organisation on behalf of Seed Media Limited in the sum of N60 million. We hereby notify you that Seed Media Limited has completed the contract. In view of this, we approve the discharge of the total sum guaranteed”
Problem arose when MTN would not pay. According information, somewhere along the execution path, MTN allegedly bypassed Seed Media and began dealing directly with its foreign partners, against the terms of the contract. It was alleged that MTN was trying to get this foreign partner to refund payments that had been made on the grounds of non-execution. But late in 2008, this foreign partner, known as TLC Marketing and based in the United Kingdom, allegedly collapsed following the financial crises of the period.
So when there was no TLC to work with, MTN allegedly reverted to Seed Media to enforce the refund. To facilitate this, the telecom operator, in June 2010 engaged the Institute of Chartered Arbitrators to mediate and compel Seed Media to refund payments already made. Consequently, the Institute of Chartered Arbitrators appointed Funke Adekoya (SAN) as Sole Arbitrator. The Arbitration had since commenced seating and has received submissions by both parties.
But Seed Media is saying that MTN appeared to have abandoned the Arbiters and is exploring other options, one of which is the alleged invitation of the Managing Director of Seed Media, Mr. Dominic Essien by the Economic and Financial Crimes Commission (EFCC).
When BusinessWorld got wind of this issue, contact was made to Seed Media and information at our disposal indicate that the company is actually awaiting the decision of the Arbiters before deciding on what next would happen. As far as they are concerned, MTN still owes them the sum of N60 million and employing strong arm tactics would not be the best way to resolve a contractual dispute, the terms and conditions of which are very clear.
According to Seed Media, if Seed Media had not completed its work, what then was the basis of paying four of the five tranches that was agreed in the contract? Again, if there were doubts as to whether or not Seed Media had completed its end of the assignment, why did MTN write the letter to Guaranty Trust Assurance confirming that work has been completed by Seed Media and that the sum in the guarantee be discharged?
Last Wednesday, we wrote to MTN’s Funmi Omgbenigu seeking their own side of the issue. But the mail was returned. We then sought and got the contact phone number of MTN’s External Communications Manager, Mr Andrew Okeleke. Mr Okeleke provided an email path to which we forwarded the mail earlier sent to Funmi.
Some of the things we needed to find out were: if it was true that MTN engaged Seed Media for the loyalty programme; If it was true that MTN was refusing to pay the outstanding balance of N60million following the cancellation of the promo by regulators and after Seed Media had completed their job; If it was true that MTN was refusing to work with the Institute of Chartered Arbitrators they contacted for the peaceful resolution of the matter and instead, went to the EFCC to facilitate refund from the vendor; If it was true that Seed Media had completed its work before the regulators asked that the Loyalty Scheme be discontinued?
Follow up calls and text messages were made on Thursday and we were promised that “someone was working on it” and would revert as soon as he or she was through.
As at the time of compiling this report on Friday evening, MTN had yet to respond. Giving the sensitive nature of this dispute as it relates to what constitutes contractual obligations, we are certain that this is a developing story.
But if the terms of the contract were as clear as Seed Media makes believe, then this entire controversy is needless and should be something the courts can easily resolve. Except there are a few things Seed Media did not see in the fine print.
