Telkom remains stuck in limbo

Government must still decide what it wants from the telecommunications group, just two months before CEO Nombulelo Moholi is due to step down. By Craig Wilson.

Outgoing Telkom CEO Nombulelo Moholi

Telkom’s share price continues to trade at near to all-time record lows as a lack of clarity from government on its plans for the company and uncertainty about who will take over from outgoing CEO Nombulelo Moholi continue to cloud the outlook for investors.

Moholi, who resigned last November after a little over 18 months in the position, leaves Telkom at the end of April. Telkom says only that its board has “embarked on a process to identify and appoint a suitable candidate” to replace her. “The board will make an announcement in this regard when it is appropriate to do so.”

Moholi’s decision to quit came not long after communications minister Dina Pule — whose own future as a cabinet minister is in doubt — threw Telkom’s annual general meeting (AGM) into turmoil by voting against the election or reelection of four nonexecutive directors. The move ignited renewed criticism of government interference at the company.

Since the departure of Sizwe Nxasana in 2005, Telkom has gone through CEOs at rate of knots: Papi Molotsane (sacked in 2007); Reuben September (resigned in 2010 when he was told his contract wouldn’t be renewed); Jeffrey Hedberg (acting in the position, he resigned in 2011 believing he wouldn’t have the mandate he’d need to fix the company); and Moholi (leaving at the end of April after tendering her resignation recently).

A question concerning private shareholders in Telkom is whether the board will be able to lure the right calibre of candidate for the top job, especially in light of government interference at the 2012 AGM.

Sipho Maseko, a former MD at Vodacom South Africa, is strongly rumoured to be one of the potential candidates for the position. Another name that’s been mentioned is Hedberg’s. Maseko says only that he’s had no “formal conversations yet” with Telkom. Hedberg says there is “nothing I can share or comment on”.

A telecommunications analyst, who asks not to be named because his firm does work with Telkom from time to time, says it’s difficult for investors to buy shares until government has clarified its intentions for the operator. With a market value of just R8bn, Telkom is no longer a “behemoth” in the telecoms sector and private investors are becoming “apathetic” about the company.

Nevertheless, the analyst adds that with the right strategic decision from government and top management, there’s “obvious value in Telkom”.

But without clarity from government, significant progress is unlikely. And that’s unlikely to be forthcoming given the turmoil at the department of communications, where director-general Rosey Sekese has been suspended and where Pule’s job as minister appears to be on the line.

If government continues with Telkom as a semi-privatised company, it may need to look again for an equity partner. But given that cabinet rebuffed Korea’s KT Corp last year — against the wishes of Telkom management — this could prove attracting such an investor could prove much more difficult. This, too, will likely do nothing to quell investor anxiety.  — (c) 2013 NewsCentral Media