The High Court has directed MTN Uganda to pay Shs 11.1 billion to Vas Garage Limited for loss of income sustained over a 29-month contractual period.
On July 16, 2013, and December 22, 2014, Vas Garage Limited entered into a contract with MTN Uganda to provide services including content provisioning, service provisioning, and bulk information services. In fulfillment of its obligations, Vas Garage developed and launched unique content services, investing heavily in advertising across numerous radio and television stations to attract MTN customers to the content.
Under the agreement, MTN was responsible for managing usage, monitoring content, and maintaining control of core information services. Upon receiving the necessary documentation, MTN configured premium short and long codes authorized by the Uganda Communications Commission (UCC) for use on its network.
MTN reserved the right to cancel any services or content that did not comply with its Information Services Provision Policy or other internal standards, provided a written notice was given.
Subsequently, MTN informed Vas Garage that UCC had initiated a campaign to prevent unsolicited SMS. MTN was required to implement a “Do-Not-Disturb” (DND) solution at its own cost, allowing customers to block unwanted SMS via USSD, SMS, or customer care.
As part of the new arrangement, Vas Garage was required to surrender its profiled subscriber database to MTN, which would then be responsible for its maintenance and updates. Additionally, Vas Garage was to pay a monthly bearer charge of Shs 5 million for bulk SMS services and Shs 12 per SMS.
In December 2014, Vas Garage discovered that MTN’s billing platform was no longer reflecting successful content deliveries. MTN attributed this to modifications in the content management system, implemented to align with the DND directive. These changes, including the elimination of auto-renewals, required users to re-subscribe monthly, which impacted all subscription-based services.
Vas Garage protested the deletion of its subscriber database, especially after having spent Shs 300 million on a three-month promotional campaign, approved by MTN, which aired in September 2014 on NTV and 30 radio stations nationwide. The company contended that, under the December 2014 Content Provision Agreement, MTN had no contractual right to delete its active subscriber database.
Following a restoration of the deleted database, Vas Garage conducted user acceptance tests (UATs) and confirmed that services were functioning properly. In July 2015, the company issued an invoice of Shs 288.8 million for revenue generated in May 2015, based on MTN’s own reports. However, by August 2015, all billing requests were failing, showing zero successful deliveries.
On August 17, 2015, MTN’s Network Group communicated its decision to permanently delete all subscription databases, citing a business directive from its marketing team, allegedly based on a UCC directive from November 2014.
MTN proposed a compromise: Vas Garage would accept a revenue reduction in exchange for marketing support and a 10% increase on future earnings. Vas Garage declined and no agreement was reached. Despite this, MTN withheld Shs 529 million in dues owed to Vas Garage.
Upon obtaining a copy of the UCC directive, Vas Garage discovered that the directive did not mandate the deletion of subscriber databases, as MTN had claimed. Vas Garage filed a complaint with UCC, accusing MTN of manipulating the directive to eliminate third-party competition and increase its own revenue.
In March 2018, UCC ruled that while the aim of the directive was to standardize SMS broadcasting and enforce the DND regime, it did not require service providers to delete subscriber databases.
Vas Garage alleged that MTN ignored UCC’s decision and refused to reconcile the losses incurred, prompting the company to seek legal redress.
Justice Stephen Mubiru ruled in favor of Vas Garage, ordering MTN to pay: Shs 8.3 billion for loss of income over 29 months and Shs 1.2 billion in accrued interest on outstanding invoice payments.
Court also directed MTN to pay Shs 300 million for the promotional campaign in September 2014a and Shs 1.3 billion in general damages for unfair competition and conversion.
The court also ruled that the awarded amounts would attract 19% annual interest from the date of judgment until full payment and ordered MTN to bear the costs of the suit.
