Telkom's Mabuza cautions government
Having lost 47% of its share price in the past year, Telkom's destruction of its market value in 2012 has been nothing short of a giant balls-up.
If Telkom had a theme tune right now it would probably be written by hard rock band AC/DC, perhaps something from their 1976 classic album Dirty Deeds Done Dirt Cheap.
No, not the title track, because there is nothing cheap about Telkom, with Communications Minister Dina Pule's advisor, Roy Kruger, insisting this week that Telkom could probably run efficiently with a quarter of its staff contingent of 22 000.
It could quite easily be Problem Child or the rocker R.I.P, but after the Mail & Guardian sat down with new Telkom chairperson Jabulane Mabuza this week, the most appropriate theme tune appears to be Big Balls.
This week Mabuza stated that he had the "testicular fortitude" for the job, his way of saying he will not allow the government to throw its weight around.
Which begs the question: Does Telkom need any more masculine displays of power?
The answer, I think, is no.
What Telkom needs is rational minds and smart business sense.
Well, that and a board that tells the government that if it wants to decide the strategy for the telecommunications company, it had better nationalise the asset.
Telkom chief financial officer Jacques Schindehütte summed up the state of emergency quite aptly this week when he said the "commercial viability of the company is at risk at the moment".
Schindehütte said Telkom's operating expenses of R15.6-billion in the first half of its 2013 financial year were almost level with its revenue of R16.1-billion, meaning the company could soon be making a loss.
Another way to look at this shareholder-value destruction is the fact that Telkom has a market capitalisation of less than R9-billion, nearly a quarter of the value of its assets.
Who is at fault?
A government that treats the JSE-listed company as if it is a state-owned entity?
Less choppy waters
Telkom's board, which did not object to the government's bullying of smaller investors rigorously enough?
Telkom's executive management team, which has not managed to steer the ship into less choppy waters?
All of these answers are probably right to some extent, but Telkom's biggest obstacle is a government that appears determined to set the company's strategy going forward.
Schindehütte called for clarity from the government about its plans for the company after the Cabinet decided not to support the sale of 20% of its equity to Korea's KT Corps.
The decision by the government to block the deal resulted in Telkom's share price plummeting and it has been widely reported that Pule has been cooking up a range of different strategies for Telkom, which she has presented to the Cabinet.
One of the options said to be under consideration is the nationalisation of the company by a government buy-out of minority shareholders and de-listing the company from the JSE.
However, Telkom's bloated staff count appears to be a major problem, regardless of strategy.
"We need to execute large-scale changes to the cost base," Schindehütte said. Some of those changes might include reducing staff numbers."
This view is clearly also held by Kruger, based on his comments alluded to above, but it is unclear whether Pule shares these sentiments.
Obviously, massive retrenchment by a partly owned state entity in the build-up to the ANC elective conference in Mangaung at the end of the year or the national election in 2014 could be seriously damaging for the ANC. It seems, much like the National Party under apartheid, the ANC sees state-owned entities as a way of creating and maintaining jobs and concepts such as cost cutting and efficiency go out of the window as they are not politically expedient.
It is clear that, eventually, someone needs to make the hard decision to turn Telkom around, retrench unrequired staff and appoint a leadership team that can put a commercially sustainable strategy on the table for the good of the economy.
Whether Mabuza will head that team remains to be seen.
Mabuza said he has been told by numerous people that he was "brave, stupid, naive or all three" to have taken on the role of Telkom chairperson.
However, he talked a good fight, insisting that his board made decisions on the basis of strategy, not the government.
Mabuza was appointed to the board last week and was subsequently appointed by the board as chairperson, replacing Lazarus Zim, who stepped down at Telkom's annual general meeting last month.
"We want our shareholders to know that we take it seriously that so much value has been lost at Telkom," said Mabuza this week, looking rather fetching in his grey suit, lime-green shirt and woven fedora hat with a black trim.
Mabuza is president of Business Unity South Africa and the deputy chairman of Tsogo Sun Holdings.
He also serves on the boards of Ampleray Investments, Eglin Investments, Hydrop Investments and Kuncedzana Investments.
"The way I see it is the day shareholders give you a strategy, they may as well come and run the business," said Mabuza. "The management, through the board and informed by various stakeholder expectations – not least customer requirements – must come up with strategies.
"I don't [look at] government as a shareholder any differently to other shareholders," he said. "Government, as a shareholder, has to persuade other shareholders … [to approve or not approve] what the board puts in front of them. This is a listed company.
"Certain elements of the government may think that we are 100% owned by it, but that is not the truth," said Mabuza. "There has clearly been a big disconnect between the shareholders and the board of Telkom. Some of the things I read about that happened in the build-up to and after the annual general meeting makes it clear that a chasm has developed."
It is Mabuza's role to mend that chasm, while considering all shareholders' wishes and concerns and, at the same time, start the headhunt for a new chief executive to replace the outgoing Nombulelo Moholi.
Mabuza acknowledges it is a tough ask, insisting it will not be a "walk in the park". One thing is for sure: it is probably going to require a lot more than big balls.