The industry has been taken aback by news of Telkom top dog Jacques Schindeh"utte's suspension - the result of an investigation into "certain allegations" made against him.
Telkom would not be drawn on what charges Schindeh"utte - who has served as the company's chief financial officer since August 2011 - faces, saying only that the board was advised to suspend him, pending a disciplinary process.
"The board was recently made aware of certain allegations and appointed an independent law firm to investigate them. The results of the investigation were presented to the board, and the board took professional advice about the correct way to deal with the report."
Telkom CEO Sipho Maseko says the company has a duty to investigate and test the validity of allegations brought to its attention. "We will do this fairly, without favour or prejudice."
Telkom has appointed its deputy CFO, Deon Fredericks, as acting CFO in the meantime.
Market reeling
Just after Telkom announced Schindeh"utte's suspension, the company's stock took a sharp dive, down by as much as 3.93% - or 110c - to trade at R26.90.
Absa investments analyst Chris Gilmour says he was "stunned" by the news that Schindeh"utte - for all intent and purposes an "excellent" CFO to Telkom, as he was to Absa - had been suspended and the market seemingly shared his sentiment.
The sudden dip in share price, he says, is undoubtedly a result of the news, which came as both unexpected and unpleasant.
"I haven't a clue what the reasons behind his suspension could be. He has been responsible for so much for Telkom, including recently making the balance sheet more accurately reflect the company's assets. This is not good news - and the market has clearly reacted to it."
He says, since May, Telkom's shares have been seeing a steady incline. "The company's shares have been higher over the past months, and even weeks, than they have been in a while. Nevertheless, it is obvious this news has hit the market hard."
The latest surprise comes three years after Peter Nelson, appointed as Telkom CFO in November 2008, unexpectedly announced his resignation in mid-2010. His notice period was originally due to end that October, but he left the company with immediate effect.
At the time, no reason was given for his departure, which followed then CEO Reuben September's resignation. Analysts speculated that both departures were due to government interference.
Company buy-in
At the beginning of this month, Telkom announced - two days after the fact - that Schindeh"utte had bought shares in the company worth almost R6 million. He bought 243 700 in stock, at a price of R24.45 a share. This purchase came just eight days before Telkom announced that both basic and headline earnings per share would be at least 20% higher in the first half of the year.
Telkom points out executives' share purchases are subject to strict governance, can only be made in specific timeframes, and must be approved by the CEO and chairman. It notes its current closed period falls between 1 October and 18 November, while Schindeh"utte's purchase was the day before this period.
This followed another purchase in July, when Schindeh"utte bought 55 000 shares - at an average price of R18.07 a share - investing R994 430 in the stock.
Schindeh"utte was re-elected as CFO at Telkom's latest annual general meeting, held towards the end of September. In a statement released to shareholders before the vote, Telkom said it aimed to have the right set of skills on board so there could be a collective commitment to achieve success in its turnaround objectives.
Telkom has not fared well in recent years and faces several challenges, including its dwindling fixed-line base (the core of the business), its mobile unit failing to gain the traction it needs, and a heavy cost base.
Resolute leader
Schindeh"utte was appointed in June 2011 and took over from Fredericks, who was then in the position in an acting capacity. Fredericks filled the spot in an interim role after Nelson's sudden departure the previous August.
After his appointment, he addressed the media and said he had a "good idea" of the challenges facing the company, and that he would probe all of its investments and projects to make sure they delivered value for money.
In August 2011, Schindeh"utte said his job was to make sure Telkom's "base camp" is in order, and that he makes the right decisions, which are then properly executed. He said he was aware of Telkom's "colourful" history and looked forward to setting the tone as one of its leaders.
Ovum analyst Richard Hurst says as CFO, Schindeh"utte would have been the guy with his hands on the wheel. He notes Schindeh"utte came in and was going to clean up the company. "It's not welcome news."
He adds that the constant change in top leadership is to Telkom's detriment.
Telkom has seen several top resignations in recent years, including last year's announcement that Nombulelo "Pinky" Moholi would step down as CEO. Also last year, its board was decimated after the Department of Communications voted against several reappointments, and Telkom had to move quickly to fill the posts.
Schindeh"utte was previously Absa Group's financial director, a position he held for five years until March last year, but stayed on with the company until September. During his time at the bank, he was involved in its buyout by UK-based Barclays.
Before joining Absa, Schindeh"utte was employed by Transnet in a number of senior roles for about 14 years.
Maseko says stakeholders will be informed of the outcome of the disciplinary hearing once the matter is concluded. "Until then, the company is not in a position to provide more information."
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