In little over three weeks, Telkom will dispose of its 50% stake in Vodacom. The divestiture will reshape SA\u2019s telecommunications landscape for the better. But the really hard work begins now for Telkom CEO Reuben September and his team.<\/p>\n
It\u2019s sink or swim time for Telkom. Soon to be divorced from Vodacom, the operator has much to prove. Its fixed-line business is going nowhere fast and, with new competition, it is going to have a hard time defending its top-line revenue and profit margins.<\/p>\n
Telkom chief financial officer Peter Nelson says September led the decision to split from Vodacom. \u201cIt showed a lot of leadership and courage,\u201d he says. \u201cThe new Telkom is standalone \u2014 I call it the naked Telkom.\u201d<\/p>\n
Nelson concedes that Telkom has big challenges but says it is the right time to introduce a new strategy and group structure.<\/p>\n
However, the challenges look daunting. Consider that SA\u2019s telecom industry is now wide open to new network operators and that MTN and Vodacom are free to compete in fixed lines. Consider also that new undersea cables will finally end Telkom\u2019s control of international bandwidth. And new terrestrial fibre projects will serve to slash its profit margins on national, long-distance bandwidth.<\/p>\n
Telkom is facing a perfect storm. It\u2019s surely not a great time to be its CEO. After all, it appears inevitable that its profits will come under severe pressure \u2014 and that means having to answer to disaffected shareholders.<\/p>\n
But September is clearly relishing the company\u2019s imminent divorce from Vodacom and the demands of a competitive market. He is spearheading a radical overhaul of the group, restructuring it into three large divisions.<\/p>\n
The company is also building a mobile network \u2014 albeit somewhat limited in scope for now \u2014 and plans to offer mobile voice telephony by the fourth quarter of this year. It will sign a roaming agreement with MTN or Vodacom to ensure it can offer national coverage. Ultimately, it could help drive down mobile data and voice prices, particularly once the industry regulator reduces the high fees that the operators charge one another to transfer calls between their networks.<\/p>\n
September is succeeding in getting quality people to join his team. He has hired former Telkom chief sales & marketing officer Pinky Moholi to head the SA business. Moholi has promised to bring back the \u201cleadership position Telkom once held\u201d.<\/p>\n
September himself has come under fire from analysts over his leadership style. I think they\u2019re being unfair. He is adopting the right strategies. And he hasn\u2019t been afraid to take tough decisions, like closing Telkom Media.<\/p>\n
He\u2019s likely to take flak, though, over a decision to postpone a big outsourcing project that would have resulted in about 19 000 of Telkom\u2019s employees being outsourced. The decision raises questions about whether politicians have leant on Telkom ahead of the election, or whether, as one person put it to me, it\u2019s a case of \u201cweak leadership fighting shy of decisions\u201d.<\/p>\n
But Nelson defends the decision: \u201cWe won\u2019t outsource problematic and poorly engineered areas because what happens is you lock in inefficiency and you pay for it forever.\u201d<\/p>\n
At face value, that seems a fair argument.<\/p>\n
There is no doubt that Telkom is still a very powerful company, with national infrastructure its rivals can only dream about.<\/p>\n
However, it has been beset by serious leadership problems in recent years. The new management team, led by September, appears genuinely determined to get the company back on track.<\/p>\n
Telkom is still SA\u2019s most important communications operator. It is critical for the economy that it doesn\u2019t stumble and fall. Whatever South Africans might feel about Telkom \u2014 and it\u2019s often not flattering \u2014 September deserves their encouragement.<\/p>\n