BAD CONNECTIONS

Barely a week into the job, new Telkom CEO Papi Molotsane is having to quell rising discontent among some members of his senior management team.

There is deep unhappiness at the top levels of the company, says a reliable source who spoke to the FM on condition of anonymity. High-level resignations – or financial settlements – could be in the offing this month.

A board meeting took place on Tuesday at which management upheavals were set to be discussed. The meeting concluded after the FM went to press and it was not immediately clear what its outcome might be.

Top of the agenda was a dispute lodged last month with the board by chief sales & marketing officer Nombulelo Moholi.

She is said to be angry about a change in the reporting structure announced last month by chair Nomazizi Mtshotshisa.

Moholi was at the board meeting and not available for comment on Tuesday.

Since September 1, the CEOs of subsidiaries Swiftnet and Telkom Directory Services have not reported to Moholi. She apparently regards this as a demotion and is demanding that the board reverse the changes to the reporting lines.

Also, Moholi now reports to newly appointed chief operating officer Reuben September. Previously she answered directly to former CEO Sizwe Nxasana. Moholi was seen as a leading internal contender for the Telkom top job, along with September, who was previously chief technology officer.

Analysts suggest Moholi may want to negotiate her exit in return for a large severance package. They say it is unlikely she will stay at the company. There are suggestions she may resign, depending on the outcome of Tuesday’s board meeting.

Moholi is not the only senior Telkom executive unhappy about the changes to the reporting structure.

At least one other executive, highly rated investor relations officer Belinda Williams, has also apparently consulted lawyers. She was out of the country on company business and could not be reached for comment.

Telkom has also lost its chief spin-doctor, senior media relations specialist Xolisa Vapi, who quit last week. Lulu Letlape, group executive for corporate communications, says Vapi’s resignation was unexpected but declines to speculate on the reason for it. Vapi could not be reached for comment.

"The Telkom executive committee would seem to be a very unhappy place at the moment," says a stock market analyst who covers the company.

Tuesday’s board meeting was the first attended by new CEO Molotsane. The former Transnet executive, whose appointment last month surprised the market, looks set for a baptism of fire. He warned staff last week that anyone not willing to work with him should leave. This, the FM’s source says, has upset executive management and other employees. Some white staff and employees of marginal business units feel Molotsane’s statement may have been directed at them. Analysts say this is the last thing Molotsane needs as Telkom prepares for competition.

Management ructions, in particular, could distract the group at a critical time , says Irnest Kaplan, MD of Kaplan Equity Analysts. "They don’t need this now, with competition just around the corner."

The second network operator will begin offering services early next year. Even worse news for Telkom is the announcement at the weekend that government intends to unbundle the local loop. This will allow competitors access to Telkom’s telephone exchanges and allow them to serve consumers directly, without having to lease access to Telkom’s lines.

Government also wants the landing stations for the Sat-3/Wasc/Safe submarine telecom cables that link SA with the world to be declared an essential service.

These proposals, if implemented, could have a dramatic impact on Telkom’s future profits.

© Financial Mail, 2005

Reproduced with the permission of the Financial Mail

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BAD CONNECTIONS