‘Yet a new Telkom’
At last Wednesday’s Telkom ICT Journalist of the Year awards, the company’s then CEO Papi Molotsane spoke at length about evolution. For the most part, Molotsane was relaxed but had the requisite hint of nervousness while delivering his speech to some of those who had judged him ruthlessly over the past 18 months.
The next day, Molotsane told a hastily convened "urgent" board meeting that he was stepping down. Media reports over the weekend suggest that most of Molotsane’s senior staff only heard of his resignation via the Sens announcement released minutes before the market closed that afternoon.
The gravity of the board meeting which led to his resignation has largely been overlooked in weekend media reports. His three-year contract was subject to six months’ notice period (either way) if terminated.
Most industry-watchers were caught by surprise. Fund managers and analysts though spoke with self-proclaimed wisdom on Thursday night, with many saying they "had seen it coming". Even with all the bravado, it’s doubtful any of them expected it quite so soon.
So why did he step down?
There has been a significant amount of tension between the fixed-line operator and government during the past few months. Both President Thabo Mbeki and his deputy, Phumzile Mlambo-Ngcuka have publicly slated Telkom for contributing to the high costs of telecommunications in SA. These costs have also been blamed for impeding economic growth. For example, last week in an interview with the Financial Times, Mbeki publicly attacked Telkom, saying the company is "profiteering", and described its fees as "absolutely phenomenal". Molotsane responded by saying that Telkom would review its fees.
Lately, government has also taken Telkom to task for signing the supplier contract with Alcatel Lucent for the new Eassy submarine cable. Telkom has been adamant that it wants the cable to be run on commercial lines. The Department of Communications wants signatories to operate within a policy framework where all users would have equal access to the system whether they’d invested in it or not.
Tensions have not been limited to interaction with the state, though. There has been internal friction between Molotsane and management. Executive committee members Belinda Williams (investor relations officer), Pinky Moholi (sales and marketing executive) and Oupa Magashule (human resources executive) were all suspended and subsequently left after Molotsane’s appointment in late 2005. The dissension in the ranks was speculated to have been because of changes to the reporting structure as well as Moholi’s unhappiness about not getting the top job.
More recently however, Wally Beelders left his position as chief sales and marketing officer after roughly 30 years at the company. He was subsequently snapped up by Vodacom. It’s hard to relate his departure directly to clashes between himself and Molotsane, as Beelders formed part of Molotsane’s executive reshuffle (after Moholi’s departure).
Added to this, chief technology officer Thami Msimango resigned in early March, making Molotsane’s exit the third in just over a month.
There were seemingly more tensions between executives because of a new organisational structure, which has yet to see the light of day. The Telkom board was scheduled to ratify the structure around a month ago, with the company set to be split into retail and wholesale divisions. Molotsane mentioned this as a reason why he did not need to fill the vacant position left by Beelders. While this new structure will almost certainly prevail, the exact lines of reporting and division of management are said to have caused friction.
Molotsane and his board also faced strong criticism from shareholders and analysts for the company’s sluggish performance as a listed entity. Molotsane often spoke with optimism but experts slammed him for a lack of experience and knowledge of technology when it came to running a fixed-line telephone operator. Analysts attacked him last year after certain comments he made during a presentation caused nearly R7bn to be shaved off the company’s market cap.
Speaking on the Moneyweb Power Hour on Thursday night, Irnest Kaplan of Kaplan Equity Analysts said that Molotsane "didn’t really gain the confidence in the market that one would have expected of the CEO of such a large company". He questioned Molotsane’s knowledge of the fixed-line environment, adding that "while… a CEO doesn’t have to understand the detail of every single point, he certainly has to lead the company in the right direction".
Sasfin’s David Shapiro echoed Kaplan’s sentiments, also saying that there has been "a lot of chit-chat in the market" recently and that many expected Molotsane’s departure.
Competition authorities added more pressure to the board, after they blocked Telkom’s attempt to buy IT services group Business Connexion. The hearings by the Competition Tribunal have now been postponed to mid-May. Telkom has repeatedly said the deal would allow it to have a meaningful presence in the IT services market and has taken the acquisition route rather than trying to grow a similar business in-house (which would be near impossible).
There were other tensions from customers and partners. A shareholders’ agreement over Vodacom’s ability to expand in Africa had been a sticking point between co-owners Telkom and Vodafone for years. To Molotsane’s credit, this was finally resolved late last year.
Like all other telecommunications companies worldwide, Telkom is an organisation undergoing massive change – which Molotsane, who took home R5,6m last year (thanks to a hefty performance bonus), recognised in his speech last Wednesday. He listed interconnect issues, convergence and a vastly different regulatory landscape as hurdles which the giant had to overcome. He also highlighted service challenges as an issue which needed constant attention.
In his bold speech he said that one day, journalists might write about "yet a new Telkom" vastly different from the one we know today. He detailed the progress made by the company since its unbundling from a "government department" in the mid 1990s.
The summary of development and description of Telkom’s challenges by Molotsane seemed oddly out-of-place on the night, this was the type of speech made at a valediction. Either that, or a speech from someone newly appointed to a position, something the Telkom boss was not.
He attributed the company’s successful evolution thus far to the people. He stated plainly that he was not the one man that made Telkom, rather each of the 25 000 employees contributed to its growth.
He was adamant that "like the dodo" Telkom had to adapt or else face extinction. And he was confident that the people of Telkom would rise up to the challenge. "I for one," he said, "do not want to be a dodo".
Maybe the view from the top of Telkom, the company South Africans arguably love to hate the most, brought with it too much pressure? Perhaps the man – who has been described by practically all those who have met him as passionate, loveable, likable, and friendly – had simply had enough?
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