Give Sipho Maseko more money! - TechCentral

Give Sipho Maseko more money!

Sipho Maseko

People forget that Telkom CEO Sipho Maseko left Vodacom in 2012 under rather strange circumstances. I won’t bore you with the details. But what he has achieved at Telkom since his appointment in April 2013 has surprised even his biggest cheerleaders.

He grabbed a tired, bloated, dying business by the scruff of the neck and got it into a position where it is competitive. That this is (technically) a state-owned company makes it an even more impressive feat.

Still, more than a few eyebrows have been raised at the revelation that he earned R25.9m in the 2017 financial year, with the entire 47-strong executive management team pocketing R200.8m. Comments on social media and elsewhere have rather predictably defaulted to negativity and suggestions of impropriety.

That R25.9m figure is misleading, however. It includes R9.6m in long-term incentives (in other words, vested shares), which is 37% of his total remuneration. These are from the company’s forfeitable share plan, additional shares award and performance share plans from 2013 and 2015. Short-term incentives total R8.8m (34%).

Maseko’s guaranteed total package is only 29% of his pay (R7.4m). This is by design. He — and group chief financial officer Deon Fredericks — are specifically incentivised on “long-term shareholder growth and sustainable profitability”. Performance areas are split across financial (40%), strategic milestones (25%), customer experience (20%) and people (15%).

400% return

Maseko is being (and ought to be) rewarded for turning Telkom around since his appointment. On the last trading day before he arrived, Telkom’s share price was R15. On 31 March 2017 (the end of the group’s 2017 financial year), it was R75.03. This is a 400% return in four years! The dividend has been restored and is growing. Again, people forget that the dividend was passed in 2012, 2013 and 2014, and was a paltry R1.45 in 2011. This has been achieved without asset sales. The new operating model, unveiled in June, will unlock further value.

But this is not a one-man show. Executives are being rewarded for driving this turnaround (as they should be). The average guaranteed pay increase for exco (and managers at all levels) was 0% in the 2017 financial year. For this, Telkom should be applauded. Compare Telkom’s executive pay to the salaries earned doled out to those in charge at other state-owned enterprises such as Transnet and Eskom and make up your own mind. A comparison to the private sector is especially flattering to Telkom. If Maseko were elsewhere, he would probably be earning more (some prescribed officers at MTN Group earn almost as much, for example).

It has scrapped the short-term incentive scheme for rank-and-file employees (and frozen salaries, with a 6% increase coming in the 2018 financial year) and introduced “a variable-based incentive scheme … known as Performance Pays. Performance Pays focuses on customer satisfaction and productivity metrics.” Telkom says these “incentives vary between 0% and 9% based on individual performance and are payable per quarter. In addition, employees who perform at or above a three performance rating each year, will each receive a “14th cheque”, payable in June 2017.

Shareholders are smiling. Staff should be smiling: there is renewed energy and purpose about the organisation (yes, there have been steep cuts to the workforce, but the business was overstaffed on every possible metric or global comparison). And government is smiling, too. Telkom is no longer a headache and in the past year has contributed R1.6bn  to national treasury (R691m in taxes and R874m in dividends).

Moneyweb managing editor Ryk van Niekerk argued last month that Telkom is a lone beacon of hope. He’s right. Privatisation — even partial privatisation — of state-owned enterprises, however fanciful a dream this currently is, will ensure the market rates and rewards performance accurately (not with bogus and manipulable phantom share schemes).

It is worth dwelling on the fact that Telkom is not quite a state-owned enterprise. Technically, sure. But, it’s more of a quasi-SOE. It is majority-owned by the government (although this seems set to change as treasury runs out of options), but it is run for the benefit of all shareholders. In other words, it is run like a proper business!

Chairman Mabuza

Maseko and his exco aside, one cannot overstate the phenomenal job done by chairman Jabu Mabuza and the rest of the board of directors. Sure, government’s golden share expired in 2011, but Telkom has largely been left to its own devices. This almost certainly took some smart manoeuvering (Mabuza has been chair since November 2012) as many previous board members would attest (some have, privately). I would argue that Mabuza’s annual director’s fee of R1.3m is an even bigger bargain than Maseko’s salary.

For the first time in decades, Telkom is not only stable but growing and — importantly — it is shielded from political interference. The cynic in me will dwell on the fact that maybe the ruling party and the likes of the Guptas have far bigger troughs to go sniffing in.

  • Hilton Tarrant works at immedia
  • This column was originally published on Moneyweb and is used here with permission

10 Comments

  1. Couldnt agree more Hilton.

    Telkom used to drive me mad. They weren’t embracing Fibre. They sold their share in Vodacom so they had no mobile.
    They had way to many staff maintaining old technology.
    They couldn’t move to the new tech w/o reducing costs and they couldnt reduce costs without trimming staff. Successive CEOs tried…and couldnt make it happen.

    Enter Sipho.. Embraces fibres, Telkom Mobile grows. They invest in Next Gen tech and trim back staff. In a quasi govt owned org…Well done.

    I am a little on the fence with BCX but I can see the positives,

  2. So Telkom are doing well (according to the writer). So now we hear that govt (treasury) are planning to sell off Telkom to pay other debts such as Eskom (where it seems grand theft is the order of the day). So where things work and are growing govt get rid off. Seems LCD of theft corruption and incompetence must be maintained.

    Did the CEO not last year promise that telkom would unbundle the need for a landline and rental costs from the ADSL line rental?

  3. Ofentse Letsholo on

    Yeah I agree with you, I remember when Maseko entered the building and the share price was at about R11-14 and he bought shares I think worth of 100k if not 1mil before he made all the changes. Telkom still has a long way to go, a really long way to go but it has improved from where it was. I actually never saw it being in existence in this current time. Big ups to Maseko, he does deserve double what he was given if not 3 times.

  4. Maseko has really done the impossible. I recently went to their centurion office and even i had to admit that there was something new about the old lady (Telkom). there was a new man in town. So yes, he probably deserves what he earned more than many CEOs that i know of in the telecoms sector.

  5. Greg Mahlknecht on

    While he’s done great things financially, I still maintain that Telkom have gone backwards technically and will pay for it in the long term. Contrary to what so many say, I think that Maseko missed the FTTH bus by a few years and have ceded the majority of the potential market to the opposition – it’s only in the last few months they’ve doubled down, when they had 3+ years head start under Maseko’s reign. When their own products cost half the price on other’s infrastructure, it’s fairly obvious that they’ve taken a few wrong turns in their roll-out.

    Their support is just as bad as it’s even been, and they’re further alienating clients by pretty much leaving the copper to rot and telling guys to wait months or years, because don’t worry, FTTH is coming.

    But hey, they’ve cut enough corners to make more money, so at least they’ve made someone happy!

  6. tongue in cheek on

    well just yesterday their lads(openserve) where in my property for fibre installation, which is what we have been waiting for, a bit more solid feet on the ground approach than other other telco’s

  7. Telkom’s service still suck, if you don’t have contacts in Telkom when you experience problems you are well and truly stuffed!

  8. ranger@mybroadband on

    “They sold their share in Vodacom so they had no mobile.”

    The shareholder agreement precluded Telkom from offering any wireless broadband service that offered mobility, but didn’t preclude Vodacom from offering fixed-line services.

    Once Vodacom started growing their business fibre products, it was clear Telkom had to sell Vodacom and start a mobile network. That was the entire reason for selling the stake in Vodacom (which was finalised in 2009, and 8ta launched in late 2010, long before Sioho joined).

    The investment into FTTH (includong a trial with 1000 customers) also started before Sipho. Yes, he may have put focus on it, but any competent CEO would have.

  9. ranger@mybroadband on

    “Did the CEO not last year promise that telkom would unbundle the need for a landline and rental costs from the ADSL line rental?”

    He promised that Telkom customers would no longer see separate line items, which is exactly what this article talks about. The costs can’t be removed … they are costs … the only question is where you account for them.

    Technically, there is no ‘ADSL line rental’, it is ‘DSL service’, and doesn’t cover any of the copper line costs. Telkom can’t remove this cost, because if another ISP sold DSL (which Telkom is legally obliged allow), Telkom would not recover any of the telephone line costs (and it is cost-prohibitive to allow ISPs to sell telephone lines with little ROI compared to spending the same money on FTTH roll-out which doesn’t have this issue).

  10. I’d say they stalled technically, instead of went backwards. There was too much that could not be done at Telkom due to the bloated staff complement filled with dead wood with no skills, drive or incentives to improve. I believe Maseko trimmed staff numbers down to around 10,000 from 22,000. That is a massive feat on its own. And I don’t see how he could have achieved anything else without first get that out of the way along with implementing performance incentives. So due to this, they had to stall on fibre rollouts and other technical innovations.

    But they definitely are catching up, slowly but surely. The foundations of a successful business seem to have been re-laid. Now to build on top of it. Let’s hope they don’t faulter now that the toughest bits are behind them.