Telkom's voluntary retrenchment and early retirement offer to management, in a bid to cut costs, seems to have backfired, as four top executives have left the company.
Since it started offering voluntary severance packages to management at the end of April, four top-level executives have taken the offer - and left the company. The four executives are among the most senior to have accepted Telkom's offer.
The top-level resignations have raised concerns, with an analyst suggesting this could mean not all is well at Telkom.
Telkom has lost its chief of strategy Naas Fourie, MD of Telkom International Thami Msimango, head of procurement Stafford Augustine and group executive for network provisioning Marius Mostert.
The executives left the fixed-line operator at the end of last month, along with another 130 managers who have also accepted voluntary retrenchment packages.
Years of experience
Msimango spent about 26 years working his way through the group's ranks and was in charge of growing the company's international operations - a key growth area for Telkom.
Fourie was instrumental in guiding Telkom's restructuring, which led to the company's unbundling of its stake in mobile operator Vodacom last year. He was also the man behind the company's own mobile strategy, which is expected to launch in the second half of the year.
Mostert, who had been with Telkom since 1973, was responsible for the key functions of planning its network infrastructure development. A year ago, Telkom lifted his suspension after a forensic investigation cleared him of allegations around tender irregularities.
Nothing untoward
Telkom, however, says there is nothing suspicious in the fact that it has lost the four highly-qualified executives.
The company says this does not leave a void, and the plan is to “either backfill these positions, or in some instances to restructure such remaining managers to have a broader management span”.
Telkom says the voluntary packages are part of its plan to permanently reduce the number of managers and improve “the competitiveness of the company's management force while positively impacting its cost base”.
At the end of the last financial year to March 2009, it had almost 2 500 managers and total staff of 21 000.
When the voluntary retrenchments were announced, JC Smit, Telkom's acting chief of human resources, said the packages were offered to all managers.
Telkom says not all applications were approved and it reserves the right to retain “critical positions”.
“In addition, in line with the previously announced business unit structure, the company wishes to ensure maximum alignment of managers with structures and strategy going forward,” it says. “Over time, the number of managers to general staff has increased to the point where it needs to be addressed to keep costs under control.”
Worrying
However, Absa Investments analyst Chris Gilmour says it is concerning that the business has lost top talent. “Voluntary retrenchment packages are self-defeating, particularly in an economic upturn, because you tend to lose the good people.”
Gilmour also questions why the company is cutting costs when the South African economy is three-quarters into a solid recovery. “I'm finding this hard to swallow.”
The fact that voluntary packages have been taken by four top members of management could indicate “things are far worse at Telkom than we currently imagine”, he comments.
The company told shareholders recently that normalised headline earnings per share, stripping out exceptional items, would be between 5% higher and 15% lower than last year's 506.1c.
Gilmour says the loss of top staff has “all the hallmarks of a management crisis,” especially as two of the executives were responsible for implementing the operator's punted growth areas in mobile and offshore.
Solidarity spokesperson Jaco Kleynhans says Telkom “clearly no longer regards the retention of expertise as a priority”.
Related story:
Top Telkom execs take package
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