The resignation of Telkom CEO Nombulelo "Pinky" Moholi yesterday has ignited speculation and alarm as to the future of SA's largest integrated communications company, which is also one of government's key assets.
As Telkom's majority shareholder and the entity instrumental for a number of spanners in the company's works, government has been strongly criticised and held liable for the untimely exit of a leader revered by the industry.
Moholi's resignation comes less than a month after chairman Lazarus Zim announced he would quit the board, and makes her the fifth CEO to walk out on the company in seven years.
As it now stands, Telkom's board of directors has eight empty seats, following the resignation of non-executive director Neo Phakama Dongwana (also announced yesterday) and government's vote against the re-election of four of the company's directors at Telkom's AGM last month.
The latest move compounds the precarious position Telkom has found itself in of late - having to face various challenges, including a hefty fine from the Competition Tribunal, a failed transaction with South Korean KT Corporation, and fragile financial prospects.
While Telkom asserts Moholi's departure does not impact its ability to operate at an optimal level, industry observers say the withdrawal of a competent leader, who was earmarked to bring stability to the embattled company, leaves Telkom in the mire.
Seeking stability
The Public Investment Corporation (PIC), which has a 10.61% stake in Telkom, says Moholi's resignation comes as bad news, as the firm "would have liked to see some stability at the executive level".
That said, the PIC acknowledges Moholi had been around for a "relatively short period of time and was faced with various inherited challenges, some of which will only be resolved once an appropriate strategy and correct structures are in place".
The PIC says it is unaware of the reasons for Moholi's resignation, but has called for stability at executive level in the midst of the upheaval. "It is critical that we establish stability at the executive and board levels as the entity has been losing value over an extended period of time."
The PIC says it is important to turn Telkom around as soon as possible, "and we believe the starting point is sorting out governance issues".
Trade union Solidarity says Moholi's resignation is a setback for the company, considering Telkom had been "reasonably stable" under her management - despite difficult circumstances.
Marius Croucamp, Solidarity's spokesperson, says Moholi's withdrawal will breed further instability in the company. "[We are] concerned about who will take over the reins from Moholi, as her successor will have to re-establish stability in the company."
Broken trust
Democratic Alliance (DA) shadow communications minister Marian Shinn has dished out sharp criticism of the government and says Moholi is "wise to walk away from having to account to this type of shareholder".
Shinn says she believes Moholi's trust in the major shareholder of Telkom has broken down completely. "Ms Moholi, with insight into government's plans for Telkom, which have taken five months to evolve, obviously has no confidence in these and wants to have no responsibility for their implementation."
She says communications minister Dina Pule's "mishandling of Telkom on behalf of Cabinet" drove Moholi out of the company. "Moholi was key to the negotiations with KT Corporation that would have given Telkom a cash injection of R3 billion, boosted technical skills and product development, and revitalised operational strategies.
"She was broken-hearted when Cabinet killed the deal, despite it having initiated the talks. It must have been untenable for Ms Moholi to realise, despite monthly meetings with Minister Pule during the negotiations, that the minister did not once mention that government had no intention of selling a 20% stake of Telkom to KT Corporation."
Destructive development
World Wide Worx MD Arthur Goldstuck says the departure of a leader the industry saw as hugely effective is damaging to Telkom for a number of reasons.
Firstly, he says, Moholi was a valuable force within Telkom. "But she found herself steering a massive ship that resisted attempts to move it in different directions - particularly in the consumer space where pricing and strategy have high visibility - so every decision made there is a political one."
The fact that Moholi is the fifth CEO in seven years to quit the company also sends a very negative signal to investors, says Goldstuck.
"Third of all, staff morale must plunge each time management changes, especially when it is clearly a result of interference - rather than for the sake of improvement."
While he doesn't foresee a mass exodus taking place post Moholi's exit "due to the current employment climate", Goldstuck says there will be those executives who will go elsewhere to find an employer that will appreciate them more.
Richard Hurst, Ovum's emerging markets analyst, says the announcement of Moholi's resignation yesterday was "the last thing investors want to hear".
He says the scenario is indicative of "revolving door syndrome" - something he says many CEOs experience.
"[A company] needs sustainability in terms of strategic vision that the CEO is supposed to impart. This is not good news for investors who are looking for clarity and structure. There are now eight empty seats that the minister says will be filled by year-end, but this is unlikely to happen."
He says this just adds to the "ongoing uncertainty" shrouding Telkom, exacerbating investors' (who were just getting comfortable with the leadership) lack of faith in the company.
"Could it be that we are actually seeing too much interference in the running of Telkom from the majority shareholder? There again, the problem is that Telkom needs to function as a business entity that secures revenue and shareholder value - while at the same time balancing other objectives. And that sometimes makes it less dynamic than its competitors."
Where to now?
Shinn says the DA feels government should step aside - sell its shares and let the business and communication professionals run Telkom. "Over the past five months, Cabinet has shown it has no concept of how a listed company such as Telkom must be run and is contemptuous of the laws governing corporate operations.
"There is talk of nationalisation and buying out the minority shareholders, but I doubt National Treasury has the money to buy out the shareholders, or has the stomach to invest funds in an entity whose future is unlikely to retain and attract top telecommunications skills.
"Telkom is not a parastatal. It is a JSE-listed company in which government and PIC together own the majority of shares. It is the only entity which government 'controls' that is listed on the JSE and this has proved difficult for the Cabinet to comprehend.
"They keep treating it like it is a parastatal or state-owned company in which government calls the shots as it has total control. They have been dismissive of the interests and responsibilities of the minor shareholders who have their investors' interests to safeguard and who have seen the value of these investments plummet this year."
Emerging quandary
Goldstuck says the latest blow to Telkom presents an "interesting conundrum" as to whether it makes sense to break up the company at this stage.
"You have a consumer business in permanent decline, and a business division that is going strong, and the two seem to be completely incompatible with each other - although you would imagine the opportunity for the consumer business to leverage the infrastructure would give it a massive advantage, but the opposite has happened. Because they have that advantage, there seems to be no impetus for them to be competitive."
A split - into disparate consumer and business entities - says Goldstuck, would be ideal for investors, but quite the opposite for consumers. "If they shed the consumer side, the company would be left with a far more effective business division. It would be disastrous for consumers, but then Telkom's approach has been disastrous for consumers for some time now anyway."
Communications minister Dina Pule says that, while the department "would have loved to have Pinky stay in the company for the future, because she understands Telkom", there is nothing the DOC can do if she has taken a decision to resign.
"All we can say is that we appreciate the fact that we had her and she has given us her all."
Regarding a way forward, Pule says the department's priority concerning Telkom is to "make sure we have a board there and that the company is stabilised".
She says she cannot champion the investment of the private sector, but only that of the government. "The board has to provide the balance between what government wants and what other shareholders want."