Telkom plays open cards

Fixed-line operator Telkom has finally spoken out against allegations of government interference and the role of the chairman of the board in the recent dismissal of its CEO.

Speaking at a media briefing in Johannesburg this morning, Jeff Molobela, chairman of Telkom's board, acknowledged that the board has commissioned an investigation by auditing and accounting firm KPMG to look into complaints of interference by the chairman in the executive management, and that the findings are still pending.

Molobela explained that the decision to commission the investigation stemmed from complaints authored in a formal letter to the board by then group CEO Reuben September.

But despite the pending investigation, the chairman wanted to set the record straight, saying September's dismissal was based on his failure in key areas of Telkom's strategy.

“The board could not stand aside when some of the pillars of our core strategy were falling apart,” he noted. The process followed and the decision not to renew September's contract was meticulous and based on a majority decision by the board, added Molobela.

Upon his appointment as chairman, Molobela explained that his top priority was the issue of Telkom's ailing Nigerian operation Multi-Links.

The company initially invested in Nigeria in 2007, but the unit has been a disappointment since it joined the Telkom stable. So far, Telkom has written down Multi-Links by R5.6 billion, which is a third more than the company paid for the Nigerian operator.

After consultation with the board, it was decided that a special task team be formed to engage with the then CEO and the board to ensure that decisions regarding Multi-Links were sped up and not lost in the board's lengthy decision-making process, informed Molobela.

However, he noted that the executive management did not favour the task team, arguing that the board was micro-managing and interfering in the operation of an asset that should have been under the direct control of management only.

But Molobela insists the issue of Multi-Links' is within the board's jurisdiction and that the task team would be instrumental in giving the board a closer look at the situation to implement a turnaround plan.

Earlier this month, ITWeb reported that analysts were of the view that government interference was the root cause of the exodus of Telkom's top talent.

But today, acting CEO Jeffery Hedberg stated there has been no government interference in the running of Telkom. "In fact, I've recently had a very positive meeting with government," he said.

Molobela took the opportunity to explain that government is merely a shareholder in Telkom, albeit a 39% shareholder.

He noted that although government has special rights, including the ability to appoint five out of 12 directors to the board, it was up to the board to act in the best interest of all of its shareholders.

To this end, the candidate for Telkom's permanent CEO position will first be decided by the board, and only thereafter will government as well as other shareholders have an opportunity to approve the candidate, explained Molobela.

He reiterated that government, like any shareholder, has the right to make recommendations for the next CEO, but the board and board processes will ensure the final decision is best suited for all shareholders.

“So the board will not simply rubber stamp government's wishes,” concluded Molobela.