[By Duncan McLeod]
Things have gone awry at Telkom. It’s already facing a growing barrage of lawsuits and competition complaints, and anonymous dossiers leaked to the media in recent weeks suggest a deeper malaise. Can the group be fixed?
The rot at Telkom set in years ago when the board — no doubt under pressure from government, its largest shareholder — appointed former Transnet executive Papi Molotsane as its CEO, replacing Sizwe Nxasana.
Molotsane lacked telecommunications experience. It showed. On his watch, Telkom bought 75% of Nigeria’s Multi-Links, a decision that has cost the group billions of rand.
The problem with Multi-Links is that it operates a code division multiple access (CDMA) network in a market dominated by cellular GSM. Consumers couldn’t readily port to Multi-Links because their GSM phones wouldn’t work on the CDMA network. This — and what appears to have been gross mismanagement of the asset — means Multi-Links probably won’t survive.
Molotsane was also the man behind Telkom’s decision to get into pay-TV — later abandoned by his successor at a cost to shareholders of more than R500m.
Since Molotsane’s hiring (and ignominious firing in 2007) Telkom has been through CEOs at a rate of knots. Telkom lifer Reuben September replaced Molotsane, first in an acting capacity and later as full-time CEO.
But September didn’t last long either. He left earlier this year after Telkom’s board, under government-appointed chairman Jeff Molobela, declined to renew his contract.
Now, an American, Jeffrey Hedberg, who was credited with helping set Cell C on a new course, is leading the organisation, albeit in an acting capacity until the board (read: government) has found a replacement.
Hedberg appears to be well respected by senior management at Telkom, and he has a strong background in telecoms. But it’s far from certain he’ll get the CEO job full-time.
With government still exercising considerable sway over Telkom’s board, and its special “class-A shareholder” rights expiring in March 2011, it may opt for a loyalist rather than appointing the best person for the job.
However, that would be a disaster for a group that is already weighed down by litigation, regulatory intervention, competition, a failed international expansion strategy, powerful unions and a bloated workforce.
Anonymous dossiers released in recent weeks, in which a long list of allegations are levelled at current and former senior management, give insight into just how many problems are bedevilling the group.
It’s not known who is ultimately behind the dossiers, or what their agenda is, but even if only half of the allegations have merit, it shows the rot runs deep.
What Telkom needs more than anything now is a stable management team and a top-class CEO who will be given the freedom to root out the problems, set a clear strategy and execute it without political interference.
However, the chances of that happening look slim. New communications minister Roy Padayachie has already said government views Telkom as a strategic asset, one that must help the state fulfil its policy objectives.
It’s not known yet what precisely Padayachie regards as Telkom’s role as being, but given the ANC government’s abysmal track record of managing state-owned enterprises, statements like this should ring alarm bells.
Far from freeing Telkom to compete with fleet-footed and well-resourced rivals, government wants to get more involved. But this runs contrary to the global trend. Most governments are selling incumbent fixed-line carriers and letting the private sector get on with the job of providing services.
For the most part, it’s a model that’s working well. What makes SA so special?
- Duncan McLeod is editor of TechCentral; this column appears in Financial Mail
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