Subscribe

A new Telkom

Nicola Mawson
By Nicola Mawson
Johannesburg, 28 Aug 2014
Telkom has a long road ahead, but is confident it can get there, says chairman Jabu Mabuza.
Telkom has a long road ahead, but is confident it can get there, says chairman Jabu Mabuza.

A fresher, nimbler and crisper Telkom is in the offing as the telco reinvents its public image and bulks up its available cash to over R3 billion.

These steps come at a time that it seeks to move into a digital era by becoming a converged player through its R2.67 billion acquisition of Business Connexion (BCX).

However, its reinvention attempts are overshadowed by a corporate governance cloud that still hangs over the company. CEO Sipho Maseko has come under fire for awarding a R91.1 million advisory contract to Bain & Co, although the company has defended it as a legitimate decision. Maseko has also been at the centre of an alleged number plate cloning incident, in which he reportedly caused R30 000-worth of speeding fines to accrue to another motorist, although he has not been charged with any offence.

In addition, it recently announced its suspended CFO Jacques Schindeh"utte would take early retirement at the age of 55, with "full benefits" - an announcement that puzzled commentators as it came in the midst of a disciplinary process. The telco yesterday defended the process around its former CFO, saying Schindeh"utte "decided" to retire.

Tomorrow today

Although the telco faces these blots - which chairman Jabu Mabuza systematically dismissed as non-issues at yesterday's annual general meeting - it is in the process of turning itself around and repositioning its brand. Mabuza says 2013 was a "tough year" and the company put a lot of effort into ensuring it stays the course in terms of its turnaround, with a focus on customers as its main thrust.

Its new look - a cleaner logo that does away with the keypad - and its new tagline, "Tomorrow Starts Today", were launched on Sunday in support of its turnaround. Chief marketing officer Enzo Scarcella says the company is "embarking on a new turnaround strategy for the entire group, and our new brand campaign reflects where we want to be. This is the first time that Telkom is taking such a strong brand position and we will make every effort to achieve the brand promise."

Ovum analyst Richard Hurst notes this "new" Telkom is "shrugging off the stigma of the past". He adds Telkom has been seen as inefficient and not customer-focused, but is becoming nimbler, and moving the right way with its vision of creating digital homes and offices. "Even the market wants Telkom to succeed."

Over the past year, the company's stock has more than doubled - going from R22.90 - to its current level, which gives it a market capitalisation of R30 billion. Its balance sheet is also cleaner, and boasts R1.8 billion in cash and cash equivalents.

Telkom's new look is a brand declaration of where it wants to be.
Telkom's new look is a brand declaration of where it wants to be.

Mabuza notes the gains in the share price show Telkom is facing the right direction and, although it has a "long road ahead", he is confident it will get there. Telkom's R2.67 billion cash purchase of Business Connexion - currently going through regulatory approvals - is critical to position Telkom in the converged ICT space, he points out.

Adding to its cash power was yesterday's vote in favour of allowing it to issue millions of shares to raise as much as R1.5 billion - based on its current share price of R57.95. The issue of 26 million shares - representing 5% of its ordinary shares in issue - will allow the telco to pull in cash without having to ask for shareholder permission, although the company does not currently foresee the need to do so, says Mabuza.

Making moves

Hurst adds Telkom now has a decent management and executive team, although governance issues are a "blot". Telkom's current executive team is "one of the best Telkom has seen in years," notes Mabuza. He adds the board is reviewing its composition to make sure it has the appropriate skills to tackle the challenges ahead.

Telkom is also facing cost pressures, and has introduced initiatives to tackle this, says Mabuza. The telco is in the midst of cutting its workforce, in a move that could see more than 2 500 senior staff get the axe, in a bid to eliminate costs and get managers closer to customers.

The company is in the first phase of its organisational restructuring, following consultations with labour unions. During this phase of the process, Solidarity and the Communications Workers Union have confirmed that 357 Telkom managers would be without a job.

Mabuza says Telkom has also made a deliberate effort to strengthen its relationships with all stakeholders, noting that government - with an almost 40% stake - has not interfered in the running of the company, a criticism that has often been levelled at the state.