Where angels fear to tread

2013-03-31 10:00

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The sixth Telkom CEO in eight years begins his new job on April 1

The top job at Telkom must rival the position of Bafana Bafana coach as one of the most poisoned chalices in the country.

This week, former BP SA chief executive and Vodacom chief operating officer (COO) Sipho Maseko was appointed by the Telkom board to take the reins at the beleaguered telecoms company.

He is the sixth CEO to head up Telkom in eight years, a period in which the company haemorrhaged value.

Last year alone, Telkom lost 42% of its value on the JSE. It is currently trading at R14.59 a share, a bargain considering how much value is still locked up inside the company.

But with a dictatorial shareholder, in the form of government, life is tough.

Chairperson Jabu Mabuza talks the good talk about Telkom not being dictated to on strategy by the state.

But too many bad decisions have been made at Telkom to suggest that the same problems that affect other parastatals – such as Transnet, Eskom and SAA – are not present at Telkom.

After all, Telkom is embroiled with these other players in the scandal around partnerships with the New Age newspaper, owned by the Gupta family, President Jacob Zuma’s friends.

So is Maseko the man to sweep Telkom clean and turn the business around?

“Maseko cannot turn the business around on his own,” said Mabuza in an interview with City Press on the day of the announcement.

“He is part of a team.”

He insists that Maseko was the best candidate, although he acknowledges that Brian Armstrong pushed him close.

Armstrong has been appointed Telkom COO, so it’s clear the board feels comfortable putting the country’s telecoms future in these two executives’ hands.

Armstrong was previously the MD of Telkom Business.

Maseko replaces Nombulelo Moholi, who resigned after state interference in the appointment of certain Telkom directors.

Mabuza said: “The objective of Telkom’s turnaround is to deliver sustainable performance. It is a strategy that requires a strong leadership team with the ability to ensure performance and execution, and gain the support of all its stakeholders.”

And therein lies the rub. Telkom is burdened with massive overstaffing, what Mabuza calls “legacy cost structures”, which makes it difficult to compete with the rest of the market on a fair footing.

Combined, MTN and Vodacom only make up half of Telkom’s workforce, according to Mabuza.

But although Telkom is currently implementing a voluntary retrenchment programme – not their first – if it were to shed the staff it needed to in order to compete, Zuma would probably be displeased.

That is the catch-22.

When City Press put this to Mabuza, he said this conflict is something he only ever heard about in the media.

But he does admit that Telkom has to find a way to deal with the staffing issue. “For too long we haven’t done what we should have done.”

Whether Mabuza wants to talk about the relationship with Zuma publicly or not, it is clear that relations can often appear strained.

First on Maseko’s agenda will probably be the ongoing negotiations with competition authorities.

Telkom has been found guilty of anticompetitive conduct and was fined R449?million by the Competition Tribunal in August last year.

Last week, City Press reported that Telkom had withdrawn its appeal to the Competition Appeal Court against this guilty verdict.

It has now entered into negotiations with the Competition Commission.Telkom has two cases against it, both lodged by the commission. The first was the one on appeal and the second is set down to be heard by the tribunal in June.

The second case, which involves allegations of misconduct that took place during the introduction of new technology in 2009, is said by those familiar with the case, to be even stronger than the case upon which the tribunal ruled last year.

It would make sense for Telkom to settle these matters with the commission instead of contesting them, but the company has a long history of using the legal route to stall regulation.

Then there is the launch of Telkom Mobile, which will add to the company’s mobile offering, likely by taking advantage of Telkom’s huge chunk of the 4G spectrum.

This gives Telkom a great advantage in a market that is becoming fiercely contested.

Both Maseko and Armstrong begin their new roles on April 1. They’ll be hoping they don’t end up looking the fools.

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