It all turned on placement of a comma. Was The Phone Company entitled to a one per cent commission in perpetuity on all telco M2’s net receipts, or just on revenue generated through its ‘piggyback’ deal with Vodafone?
In 2015, M2 purchased Orcon, Slingshot and Flip for $250 million, later merging with Vocus Communication. This telco consolidation caused Phone Company Ltd to reconsider the wisdom of its earlier exit from a marketing alliance with M2. The Court of Appeal was told Australian-based M2 sought assistance from Phone Company to establish a dealer network and operational capability when pushing into the New Zealand market in 2005. Phone Company facilitated a ‘piggyback’ deal enabling M2 to operate over the Vodafone network. It became entitled to a share of future M2 net revenues, in perpetuity. In mid-2012, Phone Company triggered contractual rights to take a lump sum payment and surrender its rights to future payments. Three years later, the M2-Vocus deal went public. Phone Company sued. M2 misrepresented the position when negotiating the early lump sum buy out, it claims.
At a preliminary hearing, Phone Company and M2 were in court arguing over the interpretation of their original agreement. Phone Company said wording entitled it to in perpetuity payments regardless of which carrier or carriers M2 piggybacked on. M2 said the deal applied only to Vodafone. At the time the deal was struck, M2 was using only the Vodafone network.
The Court of Appeal pulled apart wording in their 2005 agreement. Placement of a comma tied Phone Company’s commission rights to net revenue earned using only the Vodafone network.
M2 NZ Ltd v. The Phone Company Ltd – Court of Appeal (19.06.19)
19.114