Market lauds Telkom as Maseko hands baton to Taukobong

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The market has reacted positively to the appointment of Serame Taukobong as CEO designate at JSE-listed telecommunications company Telkom, according to analysts.

Telkom announced yesterday that Taukobong will replace Sipho Maseko, who will step down as group CEO and executive director of Telkom and its subsidiaries on 30 June 2022.

The analysts believe Taukobong, who previously held the position of CEO of Telkom Consumer, is a good appointment who will calm market jitters initially caused by news of the incumbent CEO’s departure next year.

On his appointment, Telkom said Taukobong is a seasoned executive with deep experience in the ICT sector in South Africa and the continent.

The company believes his appointment ensures continuity of Telkom’s ‘value unlock’ strategy.

Commenting on his appointment, Taukobong said having worked under Maseko’s leadership for three years, he will be taking over a solid business with a capable and committed team.

Although labour unions did not see eye to eye with the outgoing Maseko, he has largely been credited with turning around the fortunes of Telkom.

Thus, the analysts expect Taukobong to continue the growth trajectory the company saw under the leadership of Maseko.

During his eight-year tenure, Maseko turned the business around and evolved it from a traditional fixed business to a portfolio comprising the mobile, IT, wholesale infrastructure business and the masts and tower portfolio.

Open secret

Ofentse Dazela, director for pricing research at Africa Analysis, says for many people who have been following developments at Telkom, it was always been an open secret that Taukobong was groomed to take the baton from Maseko someday.

“Taukobong is a seasoned telecoms veteran who is very much aware of the rapid changes that are taking place in the telecoms sector and seemingly thrives in a competitive environment, being an innovative person we have known over the years,” Dazela says.

“I have no doubt that under his stewardship, Telkom will flourish further going into the future with his elevated telecoms business acumen in his arsenal.”

Telkom group CEO designate Serame Taukobong.
Telkom group CEO designate Serame Taukobong.

According to Peter Takaendesa, head of equities at Mergence Investment Managers, the market reacted positively to both Taukobong’s appointment and a strong first-quarter performance for the group.

Yesterday, Telkom announced its financial results for the quarter ended 30 June. In the quarter, Telkom’s consumer business revenue grew 8.3% to R 6.5 billion, driven by growth in mobile revenue, which grew 13% to R4.4 billion.

Takaendesa comments: “Today [Wednesday] was a difficult day for domestic stocks as most of them closed in the negative, while Telkom shares still managed to hang on to a small gain. We expected that Serame would be in a strong position to take over if the board decided to appoint internally.

“He has solid telecoms industry and executive experience from his MTN years and has also built a great track record with Telkom Mobile. That was great succession planning from the Telkom board.”

For Dazela, a good succession plan is very important. “Taukobong has worked very closely with Maseko and knows the winning recipe that was conjured up by Maseko and the team to bring Telkom to where it is today.

“Obviously, you don’t want someone who will start breaking things up and take the company in a new trajectory which could lead to its demise, or reverse the gains that were achieved with Maseko at the helm.”

He adds that unlike Maseko, who had to lay a solid foundation from scratch when he took over the reins, Taukobong is inheriting a winning horse and his job really is to ensure that the now fit-for-purpose Telkom remains with the leading pack.

Takaendesa concurs, saying Telkom is now in a much better position to sustain its business, although there is still a lot of work to be done to unlock value for all stakeholders.

“The internal appointment probably helps the group to continue on the current strategy of ‘value unlock’ in the towers, data centres and fixed-line infrastructure assets,” he says.

Sipho Maseko, Telkom’s outgoing group CEO.
Sipho Maseko, Telkom’s outgoing group CEO.

CEO’s to-do list

On the potential challenges the CEO designate will face, Dazela notes that while Telkom has done well in rolling newer and faster-speed broadband technologies such LTE, LTE-A and fibre, “I believe Telkom has not been as agile when coming to the roll-out of 5G services”.

He says this is one of the areas that should become a priority for Taukobong. “Other mobile network operators such as MTN, Rain and Vodacom are far ahead in terms of 5G roll-out activities by comparison. This could be an area where Telkom is compromised in the future if it fails to seriously chase the frontrunners.”

Telkom subsidiary BXC has also had lacklustre performance in recent months, and this should be another area of concern for the new successor, he adds.

From a market competition perspective, Dazela says the upcoming spectrum allocation and the new planned wholesale network could present challenges to Telkom.

He says the expectation is that once additional spectrum is freed up and allocated to the rest of the market players, this will stimulate competition in the local broadband landscape, thus presenting a threat to the company due to new direct competition.

“The exciting part is that the new CEO has an opportunity to unlock more value by unbundling the group’s businesses and listing them separately, considering that the big driver of the valuation is the market sentiment on the Telkom share price.

“The current market sentiment shows that there is concern over the Telkom Group. Possibly, it’s the fixed-line market drag with Telkom’s exposure to the fixed-line business, increasing competition to Openserve and increasing competition to BCX. Unbundling Telkom Group and listing the entities separately would likely unlock significant value for Telkom as the different businesses would trade at different valuations.”

Takaendesa believes key challenges will be sustaining the revenue diversification away from legacy fixed-line services and further cost optimisation to reflect the ongoing transformation of the group.

“Fortunately, stakeholder interference is much less now, post governance improvements implemented by the board under the late veteran Jabu Mabuza. The strategy set by the new board is quite clear and a large part of the value unlock is within Telkom’s control. Serame’s key deliverable is largely therefore execution on that strategy.”

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