Friday, August 19, 2011

South Africa - Telkom under (again) new management seems to be setting out a new strategy

[tech central] SA’s most important telecommunications operator has been abused for years. Telkom has been fraught with political infighting and plagued by shocking management decisions. Now, finally, indications are new CEO Nombulelo Moholi is steering the ship away from the rocks.

The billions of rand Telkom squandered on Multi-Links in Nigeria — an acquisition made by axed former CEO Papi Molotsane — must count as one of the most spectacular failures in SA corporate history.

It was under pressure from government to expand elsewhere in Africa, but the purchase of Multi-Links was doomed from the start. The company was one of four operators in the West African market using a wireless technology called CDMA in a sector dominated by GSM operators. This made it difficult for Telkom to get a toehold in the competitive Nigerian market and, coupled with bad management decisions on the ground, Multi-Links became a financial millstone around the operator’s neck.

This wasn’t the only management decision made during Molotsane’s tenure that still haunts Telkom. Its decision to get into the pay-TV business through Telkom Media — later reversed by Molotsane’s successor, the technocrat Reuben September — cost it hundreds of millions of rand more.

For years, Telkom’s senior leadership team has been embroiled in political battles that have caused incalculable damage to the company. September, for example, became embroiled in skirmishes with Jeff Molobela, the former chairman, who didn’t like him or want him at the helm — a fight September eventually lost when he tendered his resignation last year.

Former Cell C CEO, US national Jeffrey Hedberg who had been brought into the Telkom fold to try to rescue Multi-Links, was appointed in an acting capacity to replace September but left the company earlier this year after declining to make himself available for the position on a full-time basis. Instead, the job went to Moholi, who, apart from a brief interregnum at Nedbank — she quit Telkom after being effectively demoted by Molotsane before being hired back by September — has been at the company for most of her working career.

Early indications are that Moholi, with the support of new chairman, the clearly level-headed Lazarus Zim, is righting the Telkom ship. Since Moholi took the helm, what was an almost constant flow of anonymous “dossiers” containing allegations about top management has dried up.

And, although it’s still early days, Telkom does appear to realise it needs to up its game in a market that has become much more competitive in recent years. It must do much more to remain relevant in the voice and data markets, but it’s no longer behaving like it’s the only game in town.

Moholi has an enormous amount on her plate. The company’s “last mile” of copper wire infrastructure will be opened to competitors in some or other way, possibly as early as this year, through a regulatory intervention called “local-loop unbundling”; it’s coming from behind in mobile with 8ta; its monopoly over national long-distance fibre is being eroded; and it remains overstaffed and pressured by powerful trade unions. The list goes on.

In the next few years, Telkom is going to have to make several important calls if it wants to survive in a cutthroat market. One of the biggest of these may involve committing tens of billions of rand to a project to replace its copper network with high-capacity fibre into millions of homes and businesses.

The company is not ready to make a big call like that just yet, though it should already be thinking along those lines. For now, it’s good that stability and normalcy are returning to the company. Without this, Telkom won’t achieve much.

Telkom on the mend?

No comments: