What now for crisis-hit Telkom - TechCentral

What now for crisis-hit Telkom

Outgoing Telkom group CEO Nombulelo Moholi

The resignation on Monday of Nombulelo Moholi has been met with dismay by industry analysts, who have praised the outgoing Telkom group CEO while at the same time expressing alarm and cautioning that government must announce its intentions for the company sooner rather than later.

Telkom announced on Monday that Moholi had tendered her resignation and that she had offered to work out a six-month notice period as required in her employment contract. No reasons were given for her decision to leave, though it’s understood that she did not see eye to eye with communications minister Dina Pule.

The financially troubled fixed-line operator is still waiting for a decision by cabinet about its strategic future. Its share price has fallen by 40% this year on poor financial performance and concerns about government’s plans for the company, which it sees as a vehicle for rolling out broadband access in underserviced parts of the country.

Moholi’s resignation comes less than two weeks after Pule intervened dramatically at Telkom’s annual general meeting by voting against the election or reelection of four nonexecutive directors and against two new share incentive schemes for management.

Frost & Sullivan research analyst Gladys Mujuru says government interference has long plagued Telkom and this continues to hamper Telkom’s ability to operate effectively.

“There are conflicting interests,” she says. “Telkom has a mandate as a company, but government as a shareholder has its own mandate. There is still a lot of potential in Telkom, but conflicting mandates make it difficult for the company to realise this potential.”

Mujuru says cabinet has to clarify urgently what Telkom’s role is in government’s stated goal of providing universal broadband access for South Africans by 2020. “Moholi’s resignation prompts a lot of speculation in the industry,” Mujuru says. “And speculation is bad for business.”

BMI-TechKnowledge MD Denis Smit says he is “saddened” by Moholi’s resignation because, in his view, she is a “highly competent businessperson who hasn’t had enough time to fulfil her mandate”.

Smit says he is concerned that cabinet still hasn’t announced its decision regarding Telkom’s future. “That needs to be resolved as soon as possible for Telkom’s sake and the sake of its minority shareholders. Telkom’s future needs to be decided even before new appointments are made.”

Some have suggested that Telkom be divided into wholesale and retail divisions and Smit says he shares this view. “It should be split, conceptually, between wholesale and retail. Once cabinet has decided the company’s strategic future it can appoint a board and CEO to execute on that decision,” he says.

“Minority shareholders of Telkom, and the company’s staff, need clarity about its strategic future,” he adds. Ongoing instability and uncertainty surrounding the company does little to inspire confidence in stakeholders or employees.

Smit believes that Lazarus Zim, who resigned as chairman of Telkom’s board at the company’s annual general meeting two weeks ago, “failed to manage stakeholders’ expectations in a way that would secure the future of the company.

“[Moholi] is there to run the business; she’s not a politician. Zim was more strategically placed to handle the political relationships.”

Political reaction
Democratic Alliance MP and shadow communications minister Marian Shinn describes Moholi’s resignation as a “tragedy for Telkom”.

“The fact that she has been driven out because of her exasperation at the way government is managing its shareholding in the company is absolutely tragic,” she adds. The move is an “ominious sign for the future of the company and the industry, which is being hampered by government ineptitude and meddling”.

“Moholi has been treated very badly by minister Pule, who didn’t hint during the KT dealings that government wasn’t a willing seller,” Shinn says. At the end of May, cabinet decided it would not support the sale of 20% of Telkom’s equity to Korea’s KT Corp, despite the two parties being introduced by former communications minister Roy Padayachie.

“Trust between Moholi and the minister was irretrievably broken down,” says Shinn. “Her enthusiasm and energy must’ve been sapped in recent months. It was inevitable that she would leave.”  — (c) 2012 NewsCentral Media

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