Telkom

Finweek English Edition - - COVER STORY - Pinky Mo­holi

Her ten­ure at the top got off with a bang. Ru­mours had been swirling of a po­ten­tial eq­uity deal with an Asian tele­coms player and things were look­ing up. But when Government blocked South Korea’s KT Cor­po­ra­tion’s R3.3bn bid for 20% of the com­pany ear­lier this year – the writ­ing was on the wall.

The group’s share price is half of what it was this time last year. Telkom CFO Jacques Schin­de­hutte has warned that Telkom’s fi­nan­cial vi­a­bil­ity is at stake.

Veteran stock­bro­ker David Shapiro at Sasfin Se­cu­ri­ties lacks even the pa­tience to see whether or not the firm can re­alise its po­ten­tial: “Peo­ple keep talk­ing about the amount of cop­per in the ground and how they have ac­cess to ev­ery home in South Africa – this com­pany needs cap­i­tal and with a mar­ket cap of R9bn, I really don’t know where they are go­ing to get it from.”

The Telkom board it­self was prac­ti­cally non-ex­is­tent when Mo­holi quit. Ac­tu­ally, she made her plans known be­fore she could of­fi­cially step down as there was no quo­rum of the board to which she could re­sign.

In ad­di­tion to the sched­uled re­tire­ment of three non-ex­ec­u­tive direc­tors, in­clud­ing chair­man Lazarus Zim, Government and the PIC, which to­gether con­trol more than 50% of the com­pany, Government with a 39.8% stake held via the De­part­ment of Com­mu­ni­ca­tions and 10.9% via the PIC, had voted against the ap­point­ment of four non-ex­ec­u­tives, in­clud­ing Sibusiso Luthuli, who was to be­come act­ing chair­man. There were some eight board va­can­cies.

Sub­se­quently, BUSA chair­man Jabu Mabuza has joined the board and agreed to chair it. He ad­mits he may be on a hid­ing to noth­ing but says he ac­cepted the call as he be­lieved it was the right thing to do. He’d fully in­tended fo­cus­ing on per­sonal projects last year when he drew the cur­tain on Tsogo Sun. Now,

how­ever, he ’ s firmly back in the fray.

Among the many tasks fac­ing the new chair­man is find­ing a new CEO.

Re­mu­ner­a­tion is not unattrac­tive. Mo­holi was paid R12m last year. Share op­tions at cur­rent lev­els could ap­pre­ci­ate sub­stan­tially should man­age­ment be al­lowed to get on with the job of run­ning the busi­ness. In that, how­ever, lies the risk. Mabuza knows it and has al­ready thrown down the gaunt­let to Government, which he says needs to de­fine pol­icy but butt out of daily man­age­ment. Board ten­ure, how­ever, is vul­ner­a­ble as was demon­strated at the re­cent AGM where direc­tors who’d been on the board for as brief ly as eight months found them­selves voted off. It’s go­ing to take more than just a chair­man with “tes­tic­u­lar for­ti­tude” as Mabuza put it the day he was ap­pointed to get the firm back on track.

Mo­holi’s suc­ces­sor will need to tread the in­creas­ingly hard-to-read line be­tween ex­ec­u­tive re­spon­si­bil­ity and State in­ter­fer­ence. The place is dom­i­nated by strong unions mak­ing it dif­fi­cult to right­size the busi­ness and to fo­cus on de­liv­er­ing ser­vices to South African cor­po­rates and to res­cue what’s left of a dis­il­lu­sioned domestic mar­ket.

The coun­try’s com­pe­ti­tion au­thor­i­ties are also re­fus­ing to let up on tight­en­ing the screws on Telkom. The Com­pe­ti­tion Com­mis­sion wants the R449m fine for an­ti­com­pet­i­tive be­hav­iour against it raised. The Com­mis­sion had sought a R3.5bn fine but its own Tri­bunal levied the fi­nal amount at R449m ac­cept­ing that a higher amount could jeop­ar­dise Telkom’s ex­is­tence.

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