Trustco/Econet Fight Continues in Namibia

Mergers, Acquisitions and Financial Results

Trustco has filed an urgent interdict against Zimbabwe's Econet Wireless in a bid to prohibit Econet from infringing its intellectual property rights after the deal in which Trustco Mobile supplied the software platform for Econet's mobile phone-based life assurance service, Ecolife, went sour. After the termination of the agreement between the two parties, Econet announced on 9 June that it was migrating to an alternative platform while assuring policyholders that all claims will be honoured as and when they fall due. "Econet Wireless commits to ensuring that policyholders are not prejudiced and that all claims will be honoured as and when they fall due in line with the terms and conditions of the product.

While the new platform is being integrated into the system, we will not be able to update customers' usage statistics automatically. However, we are capturing all usage statistics, and we will be able to process any claims manually.

"Econet's decision to move to a new platform seems to have riled Trustco, owners of the patented transaction facilitation system.

In response to an inquiry from the Economist, Trustco's Desnei Leaf-Camp, said this week that the urgent application which seeks to enforce Econet's compliance with its contractual obligations and to prohibit Econet from infringing in any way on Trustco Mobile's intellectual property rights is likely to be heard sometime next week in the Zimbabwean High Court.

Truscto also refuted claims by Econet that the fallout between the two parties started when it demanded more fees for subscribers under the EcoLife product, including the ones who were not yet members, but had only expressed interest.

"Prior to the launch of EcoLife and subsequent to the signing of the initial tripartite agreement on 17 August 2010, the three parties to the agreement sought guidance from the Commissioner of Insurance and Pension to approve the roll-out of Ecolife in Zimbabwe. Initially a royalty fee of US$1.00 which included the insurance premium was negotiated and contracted for by the parties.

"The Commissioner correctly advised that the scope of the product should be broadened to include subscribers who were HIV positive and/or who had pre-existing medical conditions. The parties agreed to the expansion of the scope of the insurance, recognising that this would result in an increase in insurance premium payable to First Mutual Life. The resultant increase was US$0.22c per subscriber per month.

"Trustco agreed to share 50% of the premium increase. Consequently, the royalty fee, which includes the underwriting fee, increased from US$1.00 to US$1.11. An amendment to the agreement to effect the royalty fee amendment was signed by all three parties on 24 January, 2011. Subsequent to the increase, none of the three parties challenged the contract on the basis of a US$1.11 royalty fee," Truscto said in a statement in response to questions sent by the Economist.

Trustco also rejected claims that it had mislead the public by announcing incorrectly that it had insured 1.7 million customers, a number which Econet say was only 1.2 million. In a recent interview with the Zimbabwe Herald, Econet Wireless chairman Tawanda Nyambirai said Trustco had misled the investing public by announcing on the South African bourse that it had insured 1.7 million customers, yet the figure stood at 1.2 million.

"Interestingly this number has been publicly quoted by Econet in the international media. As at 31 May, 1 856 938 subscribers subscribed to the Ecolife package," Trustco said.

Trustco also denied allegations that it inundated Econet subscribers with unsolicited messages saying the number of messages sent to subscribers was strictly in accordance with the agreement, 'no more and no less.'

Trustco further said requests from other role players in Zimbabwe for the Trustco Mobile proprietary product have been declined pending the outcome of the current matter with Econet.