Safaricom has moved to court in bid to quash a Sh944.5 million cash award to a software developer, who accused the telco of launching two M-Pesa applications, with similar features they had earlier agreed to partner on but later fell out.
The telco is seeking High Court orders to stop Popote Innovations Ltd from enforcing the award it won in November 2024.
The software developer was awarded the amount by sole arbitrator- Mr Paul Ngotho after finding that the developer performed a substantial part of the deal and was prepared to do more, had Safaricom cooperated.
The arbitrator had awarded Sh39.2 million to the innovator, a further Sh902.7 million as shared revenue for the applications, and costs of the case amounting to Sh2.5 million.
“That the arbitral award dated and published on November 29, 2024, by the sole arbitrator proceeding between Popote Innovation Ltd as Claimant versus Safaricom PLC as the Respondent be set aside in its entirety,” the telco said in the petition.
In a letter on August 28, 2017, the developer’s Popote payment smartphone application would be white labelled for deployment for Safaricom’s captive market of heavy M-Pesa users (hustlers) and Lipa na M-Pesa users (merchants).
In the deal, the revenue to be shared was to originate from the charges to be levied on the users. Safaricom said it was clear from the onset that the intended partnership was specific to the white-labeled payment smartphone application and the revenue share would only accrue once the applications were in use.
The partners drafted an agreement, and it was executed by the developer but Safaricom did not append its signature.
The telco says it was also clear that the partnership agreement would operate from the effective date and would be for an initial year, from the launch date. But after the proposal, Safaricom said it changed its business strategy and opted out of the agreement.
And since the developer had spent its time and money developing the application for integration with Safaricom’s application, the parties mutually agreed to compensate the developer for the development costs.
“Accordingly, upon ascertainment of all the sums due to the respondent preceding the launch date and Safaricom’s payment of the sum, it was discharged and freed from any liability from any work or expenses incurred by the company,” Safaricom said.
The sum, Safaricom’s senior legal manager- litigation Mr Daniel Mwenja Ndaba said, was determined and paid to the developer on a full and final basis.
Mr Mwenja added that apart from the work carried out preceding the launch date which was defined as development costs, the developer did not carry out any other work.
He said before the payment of the agreed amount, the developer had earlier demanded Sh46.3 million as actual costs it incurred in the process of coming up with the application.
Safaricom disputed the amount as it was unjust enrichment. “All pre-launch costs were foreseen and provided for in the proposed partnership agreement and no provision was made for the claim clandestinely peddled as actual work,” Mr Mwenja said.
The telco said the developer relented for some time only to resurface with another claim almost one year after the first demand.
Safaricom said the subsequent demand was almost identical to the actual costs which were rebuffed by the telco and allegedly withdrawn by the developer.
The telco says about three years later (June 2021), it launched two smartphone applications in the market, the M-Pesa consumer application and the M-Pesa business supper application- connected to Buy Goods Tills and an invoicing solution known as the M-Pesa Bill manager that is connected to M-Pesa paybills.
Safaricom says the software developer was not involved in the development of the two applications at all.
The company said the developer then wrote to them on September 7, 2021, claiming that the launch contemplated in the proposed partnership agreement had happened.
Safaricom said the developer then made a claim for projected revenue despite the fact that the applications, it had launched, were different from the applications contemplated in the earlier deal.
Safaricom said in a bid to circumvent the material difference between the applications, which were launched on June 23, 2021, and those contemplated in the deal were to be launched in August 2018, the developer advanced the heresy that the launched applications had similar features.
“Without doubt, virtually all vehicles have 4 wheels and are functionally made to be on dry ground. Despite that similarity, the vehicle's functions, capabilities, and users are entirely different,” Mwenja said.
Safaricom maintained that the claim was fictitious and at best, an attempt to benefit from an activity where the software developer had not invested.
Before the arbitrator, the developer had sought an order compelling Safaricom to make a full disclosure and provide accounts relating to the revenues generated by the Safaricom Super App, M-Pesa Business App, and M-Pesa Bill manager.
Safaricom says more fundamentally, the method of revenue generation regarding the applications were materially different.
Through senior counsel Fred Ngatia, the telco pointed out that the smartphone applications contemplated in the August 2018 deal were intended to generate revenue by charging subscribers a monthly recurrent subscription fee, for their use.
It was also intended to generate revenue by charging customers a special fee when a customer undertook a payment.
The parties were then to have a revenue share based on the projected revenue generated from the monthly subscription fee and a special fee for payment transactions.
However, the M-Pesa smartphone applications launched in June 2021 simply replicated the standard M-Pesa services on a smartphone application to provide easy access to M-Pesa customers.
Further, the smartphone applications do not charge a monthly fee for use and a customer will simply use the application to undertake an M-Pesa transaction fee, Mr Ngatia said.
The M-Pesa transaction fees are uniform and apply if a customer uses the application or uses the M-Pesa menu on the SIM Toolkit or M-Pesa USSD menu, he explained.
Mr Ngotho had held that the partnership agreement was valid and binding, despite the missing Safaricom signature.
He further held that Safaricom’s change of business strategy did not affect the partnership agreement.
