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Telkom to lose September


Johannesburg, 04 Jun 2010
Read time 5min 50sec

In a surprise announcement this morning, Telkom revealed its CEO, Reuben September, will retire from the company, a move that analysts call a troubling sign for the fixed-line giant.

Telkom says the “depth of Telkom's existing leadership experience and expertise will ensure the period of transition would be a smooth one”.

However, September is not the first executive to jump ship over the last month; four other top level staff members have made the move, leading to speculation that Telkom is undertaking a transformation process.

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.

September has practically lived his life at Telkom, starting in 1977 when it was still the Department of Posts and Telecommunications. Over the 33 years, he held various positions, from the bottom-run engineering arenas through to executive level. He also served as a director of Vodacom.

He was appointed CEO of a much changed Telkom in 2007, taking over from former Transnet group executive Papi Molotsane, who was booted by the board not even 18 months after he was appointed.

Clean slate

September's run as CEO has been rocky, and his reputation has taken several knocks. With considerable industry changes, Telkom has seen an increase in competition and declining revenue from fixed-line services.

Irnest Kaplan, MD of Kaplan Equity Analysts, says that because of the changes, the entire management team at Telkom has been under heavy pressure from investors and shareholders. He notes that, while September's retirement comes as a surprise, Telkom is in need of a change.

Kaplan believes that, while Telkom is still a strong company, there are several issues which have not been well tackled. However, he is quick to say blame cannot be set at the feet of any of the executives, even though a change must be made.

He says Telkom needs a leader that has experience in turning an incumbent into a competitive business.

BMI-TechKnowledge MD Denis Smit says there must have been a difficult relationship between shareholders and September, specifically with the many problems the company faces at the moment.

He points to the fraud charges against two of its management employees in relation to cable theft, and the various legal battles it is fighting in terms of tender irregularities.

One of the tender troubles has implicated September directly, accusing him of misconduct.

Telkom is also facing a possible hefty fine of 10% of its revenue, which could see it pay a fine of up to R3.37 billion for anti-competitive behaviour. The case has not yet been before the Competition Tribunal.

Who is next?

The first signs of changes at Telkom came last year when it reappointed former Telkom executive Nombulelo “Pinky” Moholi as Telkom SA's new MD. Moholi is being widely tipped by analysts as a solid replacement for September, although Telkom has yet to announce his successor.

Moholi, an ICT veteran, left Telkom under difficult circumstances in 2005, when she headed up sales and marketing. She was widely respected within and outside Telkom as an executive and was earmarked to replace Sizwe Nxasana as CEO, who was Telkom's head before Molotsane.

Nedbank appointed her as a member of its turnaround team at a time when the financial giant was having its own difficulties. “I will have a similar task at Telkom as I did at Nedbank. Trust needs to be rebuilt and the negativity about management changed. It is easy to destroy trust, but hard to build it back up. It's going to be a good challenge,” Maholi said when she rejoined Telkom last year.

At the time, Moholi's appointment sparked speculation that September was on his way out, a notion that Telkom and government vehemently denied. September's sudden resignation has rekindled the expectations that Moholi is in place to take over the reins.

Smit says Moholi is an ideal candidate to take up the position when September leaves. “She is well respected and understands the industry.”

Set up

Absa Investments analyst Chris Gilmour says Telkom now needs someone who understands the industry. He agrees that Moholi is the likely choice for the next leader of the fixed-line business.

However, he says the way Telkom announced September's retirement seems a little underhanded. “He deserves more respect than that,” he adds. He says the voluntary retrenchment packages offered last month are also subject to speculation.

According to Gilmour, many of the executives that Telkom wanted to keep were not offered the retrenchment packages, while others were given the chance to take them. With Moholi's reappointment to Telkom last year, he says it's likely a foregone conclusion that she will take up the lead.

However, he points out that there are other candidates that could be more than capable of leading Telkom through what will be a tough time. He says Arcerlor Mittal's current CEO, Nonkululeko Nyembezi-Heita, could make a good replacement.

Nyembezi-Heita has only been at Mittal for two years; however, she was formerly an executive at Vodacom and had been on the board of arivia.kom.

As a major stakeholder, with over 30% ownership, government will be responsible for selecting a replacement for September.

Still a strong business

When September leaves at the end of this year, he will at least leave a legacy that his successor can build on.

Under his leadership, Telkom started implementing several turnaround strategies that will help streamline the business. He had already split the business into three distinctive operations and found leaders for each of these, namely Telkom SA, Telkom International and Telkom data centre operations, now known as Cybernest.

The company's announcement also says he played a pivotal role in leading the disposal of the 50% interest in Vodacom, as well as the start of the mobile plans.

“As an expert in network design and build, he was instrumental in driving network digitalisation and upgrade initiatives, as well as embedding the next-generation network technologies required to support fixed-mobile converged services,” the company explains.

September is also not the only CEO of a top telecoms business making a move. Alan Knott-Craig, Vodacom's pioneering head, left the operator near the end of 2008, and MTN's Phuthuma Nhleko will also bow out of the industry in March next year.

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