Telkom has lost its head
PAPI Molotsane arrived at Telkom’s head office in Pretoria on Thursday morning showing no sign that he was about to throw in the towel, just 18 months into his contract as CEO of Africa’s largest fixed-line operator.
But, during the course of the day, an urgent board meeting was called and Molotsane dropped the bombshell. The board, which has publicly shown support for him during his short but controversial reign, did not see it coming.
During the rest of the day, Molotsane and the board discussed his decision. There was no changing his mind and they parted ways amicably.
The first time most senior Telkom executives heard about his resignation was when the shock announcement went out on the JSE’s news service, shortly before markets closed for the long Easter weekend.
But it was perhaps only a matter to time before the man, who came into the job a telecommunications novice, bowed to political and investor pressure.
Seemingly always relaxed and philosophical about the pressures of his job, he was beginning to feel alone and frustrated in his bid to clean up inherent corruption within the group. He was also constantly running into difficulties while trying to execute his vision for Telkom.
His business associates say Molotsane was regularly pressured from powerful political quarters to influence decisions concerning the awarding of contracts. His resistance cost him key political support.
Telkom has denied that government had any role in his departure.
The formal reasons for Molotsane’s departure from Telkom will remain confidential, as per agreement between him and the board. However, the board has said Molotsane indicated he wanted to pursue other business interests.
One analyst, whose company is a shareholder in Telkom, said she was completely surprised by the resignation. “It was very unexpected. We fear that he might have been pressurised by government.”
Another analyst commented: “Many people in the investment community feel Telkom could do a lot better than Papi, and if they could find someone with a convincing vision for the organisation that will be a catalyst for the stock.
“But if the government is involved, that is bad news for Telkom and for South Africa — and that’s my hunch at the moment.”
Molotsane’s departure came in a week when President Thabo Mbeki slammed Telkom’s high tariffs and “profiteering”, reiterating that it was inflating the cost of doing business in the country and impeding the roll-out of communications to the poor.
A recent study by the Business Leadership group on 15 countries said ADSL (broadband) costs in South Africa were 139% higher than the average rate in the nations surveyed. It said local calls at peak hours were 199% more expensive.
Government still has a 38% shareholding in the Johannesburg, and New York-listed telecommunications giant, while the Public Investment Corporation, another state entity, owns a further 7.1%.
The final straw for government is believed to have been its conflict with Telkom over the East African Submarine Cable System (Eassy) contract to install a 300-million underwater telecoms cable.
The contract for the project, also known as the Nepad Broadband Infrastructure Network, was signed on March 9 between Telkom, the network operators and equipment supplier Alcatel Lucent.
While the government wants open and non-discriminatory access to the cable, companies involved want the project to be run along commercial lines.
According to technology website ITWeb, Molotsane — who spearheaded the signing of the deal with Eassy — was among the latter, placing him at odds with government policy. However, it is understood that he did have board support on this issue.
Department of Communications director-general Lyndall Shope- Mafole also made it clear this week that she wanted Molotsane to toe the line.
She said government would use its six seats on the Telkom 10-member board to stop it going ahead with the contract.
“I don’t want Papi fired. We will engage with Telkom to resolve the situation,” she was quoted as saying by ITWeb. “I’ve indicated this [the contract] was outside the policy framework of Telkom and have had discussions with their CEO. That is why Sentech [the state television signal carrier] did not sign … and I suppose others will learn. We at the Department of Communications have to make businesses understand that ICT [information and communications technology] is not just a business, it is far more important than that.”
Telkom’s communications executive Lulu Letlape poured cold water on speculation that the relationship with government had caused Molotsane to leave.
She said the government had “no influence in the matter”.
But an insider pointed out: “Government wants to reduce prices and shareholders want profits — so normal tensions will always exist as a result.”
Molotsane also bore the brunt of negative investor sentiment, which is partly reflected in the pedestrian outlook of the group’s growth opportunities.
During the former Telkom CEO 18-month reign, there has been a 34% rise in Telkom’s share price. This was below par given that the Top 40 index of blue chip stocks rose 76% over the same period.
Telkom shares jumped 2.4% higher to R171 at close on Thursday ahead of the Easter long weekend.
Letlape said Telkom would immediately start the process of recruiting a new CEO, as well replacing other key executives — chief technical officer Thami Msimango and chief sales and marketing officer Wally Beelders — who both left within the past six months. Reuben September, chief operating officer, has been appointing acting CEO.
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