Saturday, July 31, 2010

South Africa - Telkom Chairman has dismissed allegations that he interfered in operational matters

[business day] TELKOM chairman Jeff Molobela has dismissed allegations that he had interfered in operational matters, which is said to have driven CEO Reuben September and chief financial officer Peter Nelson to resign recently.

Yesterday, Mr Molobela denied claims that he had ignored corporate governance and overstepped his mandate by meddling in Telkom’s day-to-day activities .

Last month, Mr September accused Mr Molobela of transgressing the boundaries between chairman and CEO, compromising independence, corporate governance rules and investor expectations. He described the board’s performance as “suboptimal”.

Mr Nelson also alluded to the board’s interference as the reason for his resignation.

The board has hired forensic firm KPMG to investigate Mr September’s allegations and the report is expected to be handed to Telkom in the next few weeks.

According to Telkom insiders, Mr Nelson also quit because he wanted the loss-making Nigerian business Multi-Links sold. Telkom has written off goodwill of R5,6bn because of Multi-Links losses.

When he joined Telkom in November, Mr Molobela said the board appointed a task team to investigate the problems at Multi- Links and propose a turnaround. But Telkom management “was not positively disposed” to the idea and viewed it as a micromanagement problem.

According to Mr Molobela, management proposed a merger of Multi-Links and Nigerian company Starcomms, which the board rejected. Telkom was to own 39% in the merged entity. But Starcomms had debt of about 120m, mounting legal woes and a merger would have increased Telkom’s risk exposure rather than reduce it, said Mr Molobela.

“Proposing a merger of Multi- Links with Starcomms was the most irresponsible move. It didn’t make sense,” he said.

Telkom has received two buyout offers for Multi-Links. However, the focus would be on turning around the business, as Multi- Links still presented an opportunity. Telkom was still weighing its options on how to further reduce the risks, Mr Molobela said.

Mr Molobela was appointed by the government, which has a 39% stake in Telkom, on a one-year contract and has been accused of being influenced by it.

He has said having the government as a majority shareholder did not mean the board would “rubber-stamp” its wishes. But it has the right to appoint board members, the chairman and CEO. “Every shareholder has the right to try and influence … but it’s really up to the board. If government wants to influence (appointing a CEO), we will ensure that interference is kept as little as possible.”

Mr Molobela said the board had started to look for a new CEO, also internationally. Acting CEO Jeffrey Hedberg would also be considered for the job, he said.

Mr Hedberg, who three weeks ago was still the MD of Multi- Links, has unveiled a strategy that includes a mobile plan, aggressively driving broadband services and exploiting bundled services. There would be greater focus on Telkom’s business in SA, the source of most of its revenue.

Telkom chair rejects claims of meddling

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