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Daunting task for new Telkom CEO


Johannesburg, 17 Mar 2011
Read time 5min 00sec

Telkom's new CEO, Nombulelo “Pinky” Moholi, has a mammoth task ahead of her.

Moholi will have to turn the fixed-line dinosaur around, and compete in a landscape that shifted while the company was battling with internal issues.

The fixed-line operator this morning said Moholi would take over the reins from acting CEO Jeffrey Hedberg, who announced in January that he would not renew his contract beyond the end of this month.

Analysts this morning welcomed Moholi's appointment due to her knowledge of the company and operational experience. Together with the new chairman, Lazarus Zim, she is expected to solve many of the problems facing the telco.

Moholi is Telkom's first woman CEO, and the fourth to take over its helm in the past five-and-a-half years since Sizwe Nxasana left the group in September 2005, after seven years as CEO. No other CEO since Nxasana has led the company for such a long period of time.

An ICT veteran, Moholi left Telkom under difficult circumstances in 2005. She moved to Nedbank for a three-year stint, before returning to Telkom in 2009 to head up its local operations.

Moholi was widely respected within and outside Telkom, and was earmarked to replace Nxasana as CEO, who was Telkom's head before Papi Molotsane's one-and-a-half-year stint. When she returned in 2009, the market expected her to take over from Reuben September, who left in a surprise move in the middle of last year.

Analysts say Moholi has a mammoth task ahead of her if she is to take advantage of the company's vast infrastructure and move Telkom into a new technological age. Telkom has been battling slowing revenue, government interference, erosion of its fixed-line base, and an inability to succeed on the African continent.

Tsunami challenges

Denis Smit, MD of BMI-TechKnowledge, says although Moholi's selection is a “good choice”, he doesn't envy her the job. Smit explains that Moholi will first have to tackle finding a permanent CFO. Deon Fredericks has been acting in that position since Peter Nelson left last October.

Telkom's former CEOs

Jeffrey Hedberg: (Acting) July 2010 to March 2011
Reuben September: November 2007 to July 2010
Reuben September: (Acting) April 2007 to November 2007
Papi Molotsane: September 2005 to April 2007
Sizwe Nxasana: April 1998 to September 2005

In addition, says Smit, Moholi will also have to find a replacement head for the South African operations. SA accounts for the bulk of the company's revenue. Smit says Moholi will also have to come up with a coherent strategy for the company, deal with local loop unbundling, and sort out its African operations.

Telkom is disposing of its Nigerian interest, Multi-Links, which has been loss-making since the company bought into the operation several years ago.

In addition, says Smit, Moholi will have to make 8ta into a competitive mobile operation. In its launch month last October, 8ta signed up 186 000 mobile subscribers, taking 0.5% of the mobile market, but analysts do not see this as a significant amount.

However, despite the challenges, Smit says: “Telkom got this one [the appointment] right.” He explains that with Zim as chairman, Moholi will be free to focus on operational challenges as he will run political interference on her behalf.

“People mustn't write Telkom off; Telkom has got formidable assets and incredible skills.” Smit says if the company really starts to compete, it will raise the stakes in the telecoms sector.

Dwindling revenue

Steven Ambrose, MD of WWW Strategy, points out that Telkom has not had continuity of leadership for several years. While the company was dealing with internal issues and uncertainty around its direction, the technological landscape shifted, he says.

“Telkom needs to finally start behaving like a commercial company” and stop acting like a parastatal, he adds. Moholi has been given a “bit of a dinosaur in the age of the gazelle” and it will take serious surgery to turn the company into a more agile animal, he comments.

Moholi will have to completely change the nature of Telkom to take advantage of its vast asset pool, says Ambrose. The internal issues the company has faced resulted in it losing focus, he notes.

Telkom's revenue declined sharply after the company unbundled Vodacom and listed it separately in the middle of 2009. For the 2010 year, the company reported revenue of R37 billion, a slight improvement on 2009's normalised R36.8 billion.

In the first six months of the year, revenue dropped 5.4%, to R17.6 billion. At the time, Hedberg said: “Telkom's results for the six months ended 30 September 2010 paint a picture of an organisation under pressure.”

In addition, the company's fixed-line penetration rate has been falling since 2006, when it was 10%, to its current level of 8.7%. The number of people with fixed-lines has dropped from 4.7 million to 4.27 million over the same period. This decline is despite an increase in the number of ADSL subscribers, which has grown from 143 509 to 647 462 in the same time.

Telkom's mobile arm, 8ta, has also not performed as well as it should have, taking only a fraction of the mobile sector in its first few months of existence. Telkom has also battled to get its African strategy off the ground.

Birgitta Cederstrom, head of ICT Africa at Frost & Sullivan, says Moholi has been with the company for several years, and understands it and its people. Cederstrom expects Moholi to stay at the helm for some time, but questions whether she will be allowed to implement the necessary changes.

Telkom's share moved 20c higher in early morning trade, to R35.20, a 0.57% gain after the announcement, which analysts say has already been factored into the price.

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