Lazarus Zim 'an inspired choice'

The appointment of former MTN International MD Lazarus Zim has been hailed by industry analysts as an “inspired choice” in that both the political and business requirements of the high-level position have been adequately fulfilled.

This follows Telkom's announcement yesterday that its now former chairman Jeff Molobela had retired from the position, and that Zim had been instated with immediate effect.

Zim was not available for media interviews following his appointment.

The move is believed to be government's last opportunity to flex its muscles at the fixed-line incumbent as its Class A shareholding, which affords it the right to appoint the Telkom chairman, as well as five out of the 12 directors on the Telkom board, is due to expire on 5 March.

While the industry believed government's preferred choice may have been based on political motives over the greater business imperative, analysts point out that government's choice of Zim “kills two birds with one stone”.

Zim comes with a wealth of experience in the telecoms industry, after previously holding the position of MD on MTN International and executive director of MTN Group. He has also served as CEO of the M-Net Channel, MD of M-Net SuperSport, and CEO of MIH South Africa.

Absa Investment analyst Chris Gilmour explains that Zim is clearly a seasoned businessman, and this coupled with his telecoms experience, will make him extremely helpful in turning Telkom around.

Ovum industry analyst Richard Hurst concurs, pointing out that Zim is “definitely the right choice” and has welcomed what he says is a positive move from government.

While Hurst and Gilmour praise Zim's appointment, both agree that the chairman has a tough challenge ahead, most especially in finding a permanent CEO before acting CEO Jeffrey Hedberg's contract expires at the end of March.

The analysts point out that as a matter of urgency, a permanent CEO and CFO must be instated at Telkom.

There has been no update from Telkom regarding the recruitment process; however, adverts seeking applications for the post have been spotted in major daily business publications.

Gilmour adds that Zim is likely to be “superb backup” to the Telkom CEO once a permanent replacement is found.

It was speculated that a Telkom CEO would also be announced before the expiration of government's special share.

The appointment of government's preferred chairman as well as three other of government's chosen board members is likely to ensure government influence over the recruitment process.

The three new board members include Navin Kapila as a non-executive director for a three-year period. Reitumetse Huntley and Julia Hope have been re-appointed as non-executive directors for a period of three years.

Molobela was reinstated as a non-executive member of the board.

It was speculated that Hedberg had decided not to renew his contract at Telkom at the end of March because government's influence on his turnaround strategy would inhibit its success.

Frost & Sullivan industry analyst Spiwe Chireka argues that Zim must prioritise the CEO recruitment process but once the appointment has been made must recognise the need to give the CEO the space required to turn Telkom around.

Government interference has been recognised as an issue at Telkom, one in which the previous chairman was also implicated.

However, with the expiration of government's Class A licence, interference at Telkom may be minimised going forward.

Molobela's tenure as Telkom chairman was tainted by controversy after former Telkom CEO Reuben September accused the chairman of contravening the company's corporate governance policies.

The industry also slammed the chairman at the time, arguing that the exodus of senior talent at the company, including September and former Telkom CFO Peter Nelson, came shortly after Molobela's appointment.

Analysts argued at the time that the root cause for the toxic situation at the company was due to Molobela's influence, and by extension government's influence in the daily running of the business at Telkom.

The fixed-line operator commissioned an investigation into the allegations against its then chairman. According to Telkom, the KPMG report found there was no evidence to substantiate the five allegations made against the chairman. The exact nature of the allegations is unclear.