High drama unfolded at Telkom’s annual general meeting on Wednesday as communications minister Dina Pule moved to exercise her power over the company by voting against the election or reelection of nonexecutive directors and against two new share incentive schemes for management.
One telecommunications analyst, who asked not to be named because of the sensitivity of the situation, says it’s possible that Pule is attempting to establish a compliant board of directors that will listen to government demands.
“What the hell is government going to do? Who knows? There are a variety of options, but something is going to happen. We have no indication of what that will be or whether it will be good or bad.”
The drama at the AGM began when communications department director-general Rosey Sekese signalled to Telkom chairman Lazarus Zim that government, which directly holds 39,8% of the company’s equity, wished to vote differently to the way it had in its proxy vote, which it had submitted on 20 October.
After a 15-minute interregnum, during which time top legal mind Michael Katz was consulted, it was determined that government was entitled under the Companies Act to withdraw its proxy vote and vote again at the AGM.
Based on the outcomes of the votes, it appears a certainty that government voted against the election or reelection of Sibusiso Sibisi, Nomavuso Mnxasana, Sibusiso Luthuli and Younaid Waja as nonexecutive directors of Telkom. Sibisi received 42,2% of votes in favour of his election versus 57,8% against. The figures for the others were Mnxasana (40,4% for and 59,6% against); Luthuli (42,1% for and 57,9% against); and Waja (47,7% for and 52,3% against).
Neo Dongwana, Jeff Molobela and Navin Kapila received sufficient votes from shareholders to be elected or reelected.
The failure to reelect Luthuli, who is Telkom’s lead independent nonexecutive director with six years of experience on the operator’s board, comes as a particular blow. Luthuli was to take over the duties of Zim in an acting capacity. Zim stepped down as director and chairman of Telkom at the AGM.
Telkom’s board must now urgently appoint a new lead independent director, who will then assume the role of acting chairman until next year’s AGM (unless a special general meeting is called). A regular board meeting is scheduled for mid-November, but it now appears that an earlier meeting must be called to deal with the latest developments.
Government’s decision to vote against the election of the four directors is likely to cause even more uncertainty for other shareholders in Telkom, especially in light of an apparent cabinet-level discussion taking place about the company’s future. Government has said the renationalisation of the fixed-line operator is one of the options discussed by an inter-ministerial committee, which has apparently presented its proposals to cabinet.
Telkom’s poor financial performance and the termination of its talks with Korea’s KT Corp to sell 20% of its equity to the Korean telecoms operator, coupled with uncertainty over government’s plans for the company, have resulted in its share price tumbling by nearly 40% in the past 12 months.
At Wednesday’s AGM, government also voted against two new share incentive schemes for management — 66,7% of shareholders voted against them, with only 33,1% voting in favour — raising questions about Telkom’s future ability to hold on to top talent in a highly competitive market where skills are in short supply. — (c) 2012 NewsCentral Media