Funny business at Telkom

As the battle within the divided ANC rages on, the mixed messages emanating from Telkom’s head office suggest that it may be caught in the middle of the struggle for power.

While speculation about interest in Telkom from Tokyo Sexwale’s Mvelaphanda Group remains keen, Telkom is rushing through a restructuring process that seems unlikely in a company about to be sold.

The restructuring, which Telkom calls “capability management”, will “outsource” a huge portion of its core business, including its information technology, network, field operations, customer centre and stores divisions. Between 14 000 and 19 000 staff from Telkom’s workforce of 24 000 will end up employed by others.

This was confirmed by Telkom’s chief of operations, Motlatsi Nzeku, in May after strategy documents leaked to the media.

Nzeku said Telkom had embarked on its capability management programme “to balance rapidly changing technology, speed of technology development, fluctuating demand and supply of services, capacity to meet market requirements and redesign of business process”.

The outsourcing tenders are expected to be worth R5-billion to R10-billion each. Ericsson, Siemens, Alcatel, Hewlett-Packard, Amdocs, Accenture, Business Connexion and Dimension Data could be bidders.

Two questions have to be asked: what would Mvelaphanda be buying if most of Telkom’s core business had already been outsourced and why is Telkom so eager to complete a restructuring process like this in record time?

On the Mvelaphanda front details are thin on the ground.

Telkom announced in June that a consortium — including Mvelaphanda, New York-listed private equity firm Och-Ziff and other “strategic investors” — was considering making a bid for the Telkom group’s entire issued share capital, but without its 50% share in Vodacom.

Telkom had earlier announced that on May 14 it started talks with British-based international cellphone giant Vodafone about Vodafone buying part of Telkom’s Vodacom stake.

Vodafone, which already owns the other 50% of Vodacom, does not want to make it 100%. It would be looking to a black economic empowerment partner to pick up some of Telkom’s shareholding.

It has since been reported that Mvelaphanda has tabled an offer of R90-billion for Telkom minus the Vodacom share.

However, it is unclear why the remaining stagnating fixed-line business, which is under threat from Neotel and a number of smaller players looking to get into the voice and data markets, would be of interest to Mvelaphanda.

Perhaps — contrary to reports — Mvela­phanda is interested in the mobile phone business and could buy in to Vodacom as a BEE partner with Vodafone.

Regardless of Mvelaphanda’s true intentions, the eagerness of Telkom’s senior executives to push the outsourcing deal through is curious.

The Mail & Guardian understands that Telkom is days away from issuing requests for proposals, and is merely waiting for board approval, and that the company wants to award tenders by mid-September.

One analyst, who refused to be named, expressed surprise when told of the deadline, insisting that this was “really speedy” and insisted that Telkom had not moved this quickly on anything before.

Could the outsourcing strategy be a ploy by Telkom’s senior executives to save their hides?

First, if Mvelaphanda were to acquire Telkom, it would surely want to appoint a new management team to run its new asset. Perhaps the outsourcing strategy is a ploy by Telkom’s existing management to make the company less attractive to Mvelaphanda.

A second possibility is that the struggle between the old ANC (Mbeki’s camp) and the new ANC (Zuma’s camp) is at the heart of this outsourcing strategy.

Until now Telkom has been dominated by Mbeki-ites like Smuts Ngonyama and Andile Ngcaba, who were involved in the Elephant Consortium’s purchase of a 6,7% BEE shareholding in Telkom. However, the national elections in April next year should see the new ANC take control of government and it is quite possible that a new appointments committee will replace the senior Telkom executives.

If the outsourcing deals were completed before the elections, however, the new government would inherit a shareholding in a very different animal called Telkom.

Could the Mbeki-ites have an interest in substantially restructuring Telkom before the new ANC gains power over the government’s shareholding? Or do they not want to see the company as it stands fall into the hands of Tokyo Sexwale, who has positioned himself closely to the Zuma camp?

One thing is for sure: the flip-flops in strategy that are emanating from Telkom’s management don’t make a lot of sense.

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