Court orders MTN to pay service provider sh11b

KAMPALA - The Commercial Court has ordered MTN Uganda to pay VAS Garage Limited sh11.3b in compensation for breach of contract.

The case stems from a dispute that began in 2014, when VAS Garage, a licensed value-added services provider, entered into a content provision agreement with MTN Uganda to supply mobile content to its network subscribers beyond basic voice, messaging, and data, through the Uganda Communications Commission (UCC) short codes 6666 and 0800206666.

The on-demand mobile content distributed by VAS was developed through a content aggregation process involving the collection of different types of information, including blogs, news, and social media posts, which were then packaged to suit the tastes of various mobile subscribers.

In a judgment delivered on April 21, 2025, Justice Stephen Mubiru ordered MTN to pay the amount for accrued interest on outstanding invoices, loss of income for 29 months of the contract, general damages for conversion and unfair competition, and reimbursement for a business promotion undertaken in September 2014.

Justice Mubiru further directed that the amounts awarded for accrued interest on outstanding invoices and general damages for conversion and unfair competition would attract an interest rate of 19% per annum from the date of judgment until payment in full.

The court ruled that MTN’s unilateral actions breached the content provision agreement, constituted unfair competition, and led to substantial loss of income.

“When the contract ended, MTN was under an obligation to send to VAS by electronic
means, a copy of the customer database in its latest form, which it refused. This was in breach of the contract,” Mubiru ruled.

Court documents indicate that in 2012, VAS approached MTN with a proposal to enter into a "content provision agreement" that would allow VAS to provide telecom value-added services to MTN's customers.

Consequently, MTN set a condition that VAS had to generate sh82m as the minimum gross revenue per month through direct connection to MTN’s customer platform.

Upon fulfilling the conditions in 2013, MTN executed a content provision agreement with VAS under an arrangement referred to as content aggregation. The agreement was renewed in 2014 and thereafter remained in force for an indeterminate period unless terminated in writing by either party.

VAS thus developed and deployed unique content services by investing in advertising through numerous radio and television stations, thereby profiling MTN’s customers to consume the unique content.

Subsequently, MTN communicated to VAS via email that UCC had initiated a drive to ensure customers did not receive unsolicited short message services (SMS) and that they should be able to block such SMS from being delivered to them in the future.

To meet this directive, MTN was required to implement an SMS Do-Not-Disturb solution at its own expense, allowing customers to block unsolicited SMS by registering in MTN’s database via USSD, SMS, or customer care service.

In the course of implementing this directive, MTN introduced its own billing platform by a letter dated November 21, 2014, and VAS was compelled to operate through this new platform.

Under the new arrangement, VAS was required to hand over its profiled database of subscribers to MTN, which would be responsible for the maintenance, management, and updating of VAS's subscription database.

In the new setup, VAS's platform was to send a billing request, including the content sender ID and the mobile number to be billed, which MTN would validate; if the validations were successful, MTN would charge the mobile number airtime and then deliver content to the customer's mobile number SMS inbox. MTN would then notify VAS of successful or failed content delivery.

VAS was also obliged to pay a monthly bearer charge fee of sh5m in respect of the bulk SMS services and sh12 per SMS effective November 24, 2014.

However, between December 14 and 15, 2014, VAS noted that MTN’s billing platform was not returning any successful content deliveries/billing and contacted MTN for billing support via email.

In response, MTN stated that some modifications had been made to the content management process to better align it with the DND solution.

Therefore, instead of the preferred auto-renewal, users were now required to subscribe monthly to the content subscription services using toll-free numbers.

MTN stated that this affected all subscription services and that in doing so, it was complying with a written directive from UCC. This resulted in the instant suit.
According to court documents, VAS was entitled to 40% of the revenue while MTN 60%.