Guptas score in Telkom bonanza

Exclusive: The New Age newspaper, controlled by the Gupta family, is being paid R1m in sponsorship fees for each of the 12 business breakfasts it's hosting in the 2012/13 financial year. By Duncan McLeod.

Telkom agreed to sponsor a series of 12 breakfast events hosted by The New Age newspaper this year for a whopping R1m/breakfast, correspondence in TechCentral’s possession shows.

The sponsorship, for the 2012/13 financial year, marks the second year the fixed-line operator has paid for the breakfasts. However, the cost of the sponsorship has escalated by more than 30%, to R12m, compared to last year’s deal, the correspondence reveals.

It’s the first time the value of Telkom’s sponsorship of the breakfast events has been disclosed and is likely to raise questions about the influence of the politically connected Gupta family, which controls The New Age and its publisher, TNA Media.

TNA Media’s executive chairman, Atul Gupta, is said to be close to President Jacob Zuma, and was also friends with former communications minister Roy Padayachie, who died in May.

Outgoing Telkom chairman Lazarus Zim, who steps down from Telkom’s board this week, is a former director of TNA Media. He resigned from the company’s board in February, a month before Telkom agreed to renew the deal.

Telkom says there is no conflict of interest because Zim is “in no way involved” in the operator’s sponsorship decisions. “Sponsorships are decided at the executive level in a manner that complies with Telkom’s sponsorship policy,” a spokesman tells TechCentral.

Details of Telkom’s spending on the New Age breakfasts is contained in a memorandum from the company’s consumer services and retail MD Manelisa Mavuso to group CEO Nombulelo Moholi in which he seeks the latter’s approval for the sponsorship. Moholi’s signature appears on the memo, approving the request for the R12m. TechCentral has a copy of the memo as well as a copy of the sponsorship pitch from TNA. The R12m figure excludes VAT.

A source close to Telkom, speaking on condition of anonymity, says the operator spent a total of about R30m with TNA Media in 2011 — mainly on sponsorships and advertising. Telkom won’t comment on the figure, saying details of its “product advertising agreements” are “confidential”.

The Tuesday, 23 October edition of The New Age contains very little in the way of display advertising. However, of the three advertisements in its main section, two are from Telkom, including a full-page, full-colour ad for its consumer mobile arm, 8ta.

In the memo to Moholi, Mavuso says the breakfast sponsorship “offers an effective tool for stakeholder engagement and I believe that the value and profile offered by the media package, inclusive of [a] live television broadcast, is extremely good”. The breakfasts are broadcast on SABC2, with TNA Media claiming in its proposal to Telkom that the events draw in an average television viewership of more than 2,7m.

“The cost per breakfast this year is R1m. This is increased from last year by just over 30% as a result of the popularity and success of the events, especially the live broadcast,” Mavuso says in the memo.

“As per the current fiscal [year], the monthly events will be broadcast live on SABC2 Morning Live for at least an hour and a half within a format that allows Telkom to make a televised address as well as have the public engage with the event,” he adds.

TNA Media’s pitch to Telkom shows that the newspaper publisher proposed breaking down the R1m/breakfast sponsorship into R565 200 for advertising, R237 300 for branding and naming, R147 500 for catering and R50 000 for venue hire.

The New Age has not published official circulation figures so it’s impossible to know whether Telkom’s advertising in the newspaper generates a return on investment. Media commentator Gill Moodie wrote in BizCommunity in June that the newspaper had an average of only 39 000 readers in 2011, citing figures from the All Media Product Survey. “If we give The New Age a pass-on rate of four — the Daily Sun, for instance, is about 14 people – and work backwards, that’s about 10 000 circulation. Not exactly what I would call influential.”

The Telkom spokesman says the company’s campaigns are “spread across several media channels and the overall effect of these campaigns cannot be attributed to any single channel”.

‘Out of their minds’
Marketing and advertising guru Chris Moerdyk also questions whether Telkom is able to generate a return on its investment from the New Age events, even with the exposure on the SABC.

“If one of my clients came to me and said they were sponsoring some breakfast at R1m a pop, I’d tell them they are out of their minds,” Moerdyk says. “While those New Age breakfasts are very successful, one has to ask whether the people who go to the breakfasts and those who watch it being broadcast are going to go out and switch from Vodacom or MTN to 8ta. Are they going to go and get another five or six Telkom land lines?”

He says companies are increasingly questioning the value of sponsorship, pointing to the recent decision by Standard Bank to stop sponsoring SA cricket. “It’s the same as SA Airways sponsoring the golf. At one stage, they were putting millions into golf. I do not believe for a minute that all the sponsorship that went into the golf bought them one more bum in one more seat.”

Either Telkom has “too much money and doesn’t know what to do with it”, or the company is “not spending it properly”, Moerdyk says. “I can say, with my hand on my heart, that if one had to audit Telkom’s marketing spend, one would find that the expenditure on sponsorship is disproportionate.”

However, in response to questions from TechCentral, Telkom says it was able to measure a positive return on investment from the money spent on the New Age breakfasts in the previous financial year. It says its sponsorship of the breakfasts provides “opportunities” across all of the criteria it uses to measure value, including media coverage, target audience, business development and/or retention opportunities, brand equity and corporate reputation.  — (c) 2012 NewsCentral Media