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Vodacom’s secret Bok deal

MTN has muscled in on its rival’s game, but suggestions of a sweetener may soften the blow for Vodacom. MTN’s recent sponsorship of the Springboks, believed to be worth R45m/year, has set tongues wagging.

This is because the four-year deal flies in the face of telecoms rival Vodacom’s long-standing relationship with SA Rugby. Insiders say Vodacom was less than pleased that MTN had snapped up the sponsorship deal with the Springboks. As a result, MTN is understood to have paid a R10m "sweetener" to Vodacom to ease the situation. Asked to confirm this payment, both mobile operators cited "confidentiality" in the sponsorship agreement that precluded them from commenting.

The Financial Mail understands that while Vodacom declined to become the official Bok sponsor, it remains an associate sponsor, the sponsor of Super Rugby and the sponsor of the Blue Bulls — making it a significant player in the local market.

"Vodacom would have understood that [its] relationship with SA Rugby was an exclusive one," says James Monteith, an independent sponsorship consultant. "You must remember that premiums are charged for exclusivity. If exclusivity is null and void, sponsorship agreements aren’t worth the paper they’re printed on and fees will go down. That’s bad news for the industry."

But Byron Kennedy, spokesman for Vodacom, confirmed that the company had reached a "unique agreement" with SA Rugby whereby it would step away from its sponsorship rights for the Springboks, to allow the union to approach other sponsors.

"It would have been within our legal rights to insist on exclusivity. But in the best interests of the sport and the Springboks, we decided that stepping away from our Springbok sponsorship rights was the right thing to do," said Kennedy. Desiree Pooe, MTN’s senior manager for sponsorships, says it isn’t unusual for sporting codes to change sponsors and when MTN was given the opportunity, "it was the right fit for our brand".

On the issue of any pique from Vodacom, Pooe said MTN would not be aware of unhappiness on the part of any other former partner, as her company negotiated directly with SA Rugby. However, insiders who spoke to the Financial Mail say the price tag for MTN’s sponsorship is significantly less than the independent valuation suggests. This implies SA Rugby was so cash-strapped it agreed to a discounted deal.

But the decision for Vodacom to pass on the Springbok sponsorship has raised concerns that the company may consider axing its long-standing deal with Super Rugby, when it expires in 2020.

Next season, Super Rugby is being pruned by three franchises. However, there is no indication yet that Vodacom wants to review its relationship with Saanzar (SA, New Zealand, Australia & Argentina Rugby), which provides the Super Rugby competition with teams.

Kennedy said Vodacom had held the sponsorship since 1998 and had "no immediate plans to make any changes". He described the partnership with SA Rugby as mutually beneficial.

However, SA Rugby might be patting themselves on the back, considering the MTN sponsorship is understood to offer a "win bonus" or performance-related clause to the Boks. Pooe would not confirm this, saying "all contractual clauses remain in the realm of confidentiality" — hardly transparent for an industry that could do with some light. But if that is indeed a clause in the contract, it seems to be already paying dividends. The dull predictability of the Boks’ 2016 debacle was left behind in a three-test series in recent weeks when the SA team thumped France in Pretoria, Durban and Johannesburg.

Experts said the Boks were strengthened, particularly, by a strong Lions spine with Malcolm Marx, Franco Mostert and Warren Whiteley in the pack, a combination of Ross Cronje and Elton Jantjies at scrumhalf and flyhalf and Andries Coetzee at fullback.

Such a "win bonus" may become a more common feature of SA’s sporting codes, as sponsors seek to insure themselves against being aligned with losing teams.

At the same time, other initiatives are being launched to bring more money into local sport. In recent weeks, Cricket SA launched its "Global Destination League" in London — its T20 offering that, it hopes, will be as much of a money-spinner as the Indian Premier League.

Cricket SA has sold eight local franchises — one of which is reputed to have cost between US$3m and $5m — with owners coming from Pakistan, Dubai, India and even Switzerland. The league will launch later this year.

13 July 2017 - Luke Alfred

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