Whis­pers aside

You can’t run a telco with­out tele­coms ex­pe­ri­ence

Finweek English Edition - - Openers - BELINDA AN­DER­SON

WALK­ING INTO THE BE­HE­MOTH Telkom Tow­ers build­ing in Proes Street, Pre­to­ria, on the morn­ing af­ter the long Easter week­end – the first new busi­ness day af­ter the sud­den res­ig­na­tion of CEO Papi Molot­sane – felt some­thing like walk­ing into an an­cient cas­tle. The walls held the se­cret of what had gone down at the pre­vi­ous Thurs­day’s board meet­ing. How­ever, as with most high-profile res­ig­na­tions only those who were there will prob­a­bly ever know what re­ally hap­pened.

Mean­while, spec­u­la­tion has in­evitably been rife. A num­ber of fac­tors have been widely cited as rea­sons for Molot­sane’s res­ig­na­tion, but that it re­lated to a com­bi­na­tion of those – in­clud­ing share­holder and Gov­ern­ment pres­sure, as well as some dis­agree­ment over strate­gic is­sues – is prob­a­bly close enough to the truth. He may per­son­ally also just have had enough of it all.

But as the whis­pers die down the re­al­ity is that Telkom needs a new CEO. And there are lessons it can learn from the ex­pe­ri­ence. Fore­mostly, that it’s ex­tremely dif­fi­cult to run a telco, par­tic­u­larly one fac­ing the pres­sures of a dereg­u­lat­ing en­vi­ron­ment, with­out any telecom­mu­ni­ca­tions ex­pe­ri­ence.

Al­though some have lauded as a good de­ci­sion the ap­point­ment of Reuben Septem­ber in a tem­po­rary ca­pac­ity, oth­ers be­lieve Telkom must now put an in­ter­na­tion­ally ex­pe­ri­enced ap­pointee at its helm. One fund man­ager says Molot­sane’s re­place­ment should be some­one of the cal­i­bre of Vo­da­com CEO Alan Knott-Craig, with ex­pe­ri­ence in dereg­u­lat­ing mar­kets and in fixed/mo­bile en­vi­ron­ments. For that, Telkom would mostly likely have to pay up. How­ever, mak­ing such an ap­point­ment could be in ev­ery­one’s best in­ter­ests, he says.

Per­haps Voda­fone – 50% share­holder in Vo­da­com – could use the op­por­tu­nity to put for­ward some­one from its global tal­ent pool, he sug­gested (Telkom owns the other 50% of Vo­da­com).

As it did with Molot­sane’s ap­point­ment about 18 months ago, Telkom will most likely look in­ter­nally and ex­ter­nally for a re­place­ment. Group ex­ec­u­tive for cor­po­rate com­mu­ni­ca­tions Lulu Let­lape says the board had yet to meet to de­cide on the process.

Molot­sane, as much doc­u­mented pre­vi­ously in Fin­week, was con­sid­ered a lik­able guy but failed to gar­ner the re­spect of the in­vest­ment com­mu­nity as a heavy­weight CEO. With a back­ground at Transnet, Molot­sane was on the back foot from the word go but took up the chal­lenge of learn­ing about the en­vi­ron­ment en­thu­si­as­ti­cally and un­flinch­ingly. At pub­lic ap­pear­ances he al­ways spoke self-as­sured­ness – but in well­re­hearsed, broad brush­strokes. In­ter­na­tional in­vestors in par­tic­u­lar didn’t seem con­vinced.

His con­tract with Telkom would have con­tained a se­ries of de­liv­er­ables. He must have been sat­is­fy­ing those, at least ini­tially, or he wouldn’t have been paid a R3,4m per­for­mance bonus for his first seven months in of­fice. In­for­ma­tion on what his salary amounted to for the 2007 fi­nan­cial year (which closed on 31 March this year) will be de­tailed in Telkom’s next an­nual re­port and could prove in­struc­tive.

New CEO must have

ex­pe­ri­ence in dereg­u­lat­ing mar­kets.

That many fund man­agers were un­aware of Molot­sane’s res­ig­na­tion un­til the Stock Ex­change News Ser­vice an­nounce­ment rules out the pos­si­bil­ity that they ac­tively called for his head, de­spite many well-doc­u­mented con­cerns with re­gard to his strat­egy and abil­ity to ex­e­cute.

As the big­gest share­holder – with 38% – pres­sure from Gov­ern­ment is in­evitable. The push-pull of a ma­jor share­holder with the dual mo­tive of high prof­its and lower costs makes the job of Telkom CEO an un­en­vi­able one.

With the na­tional in­ter­est in mind, Gov­ern­ment re­cently re­buked Telkom twice pub­licly.

Gov­ern­ment also has a say in the board­room, al­though the ex­tent to which its five non-ex­ec­u­tive board ap­pointees in­flu­ence Telkom’s strat­egy re­mains a mys­tery and an in­her­ent prob­lem for many fund man­agers. The pres­ence of other in­de­pen­dent rep­re­sen­ta­tives on the board, such as ad­vo­cate Brahm du Plessis and Lazarus Zim (pre­vi­ously at An­glo Amer­i­can, and MTN be­fore that) must have to some ex­tent tem­pered any Gov­ern­ment in­flu­ence.

How­ever, Zim re­signed just days af­ter Molot­sane. The ex­pla­na­tion – com­mit­ments to his com­pany Afripalm af­ter it bought a 31% stake in Tokyo Sexwale’s Mvela Re­sources late last year – ap­pears per­fectly valid.

But can the de­par­ture of two exco mem­bers – Wally Beelders and Thami Msi­mango – within the space of a few weeks be co­in­ci­den­tal?

Cur­rent Telkom chair Shirley Arnold, a mem­ber of the Chair­per­son’s Fo­rum of the Gor­don In­sti­tute of Busi­ness Science and the In­sti­tute of Direc­tors among oth­ers, re­placed No­maz­izi Mt­shot­shisa in Novem­ber last year. How­ever, she’s been silent on Molot­sane’s de­par­ture at a time when peo­ple might ex­pect the com­pany to of­fer some as­sur­ance.

The mar­ket and the pub­lic – all stake­hold­ers in Telkom through its ma­jor share­holder and many of whom are cus­tomers of Telkom – will be look­ing for con­fi­dence, ex­pe­ri­ence and vi­sion in a new CEO.

He may per­son­ally also just have had enough of it all. Papi Molot­sane

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