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Moholi adds to Telkom exodus

Nov 05 2012 14:34 Reuters
New Telkom chief executive Pinky Moholi. She is th

Pinky Moholi.

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TELKOM SA SOC LIMITED [JSE:TKG]

Last traded 57.80
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Market cap 30.10bn

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Johannesburg - South Africa's biggest fixed-line phone company Telkom [JSE:TKG] lost its fifth chief executive in seven years on Monday, less than a month after the departure of its chairman and several directors.

The future of the state-controlled telecom, whose shares are down 40% this year, has been thrown into doubt by tentative government plans to renationalise and force it to push through a costly expansion of rural internet access.

The government in June also rejected a $385m bid for 20% of the company from South Korean group KT Corp.

Telkom, the bigggest fixed-line operator in Africa, said that Chief Executive Nombulelo Moholi had given her six months notice, meaning she will depart in May, about a year before her contract was due to expire.

The government - which owns a near 40% stake and a further 10.5% through the state pension fund - has discussed ways to finance a buy-out and its communications minister is due to present a report on the company's future to cabinet.

"Telkom is quite a key asset for government. Since the failure of the KT Corp deal, things started not to look great for Telkom," said one analyst who did not want to be named.

"Based on that, and the strained relationship with the government, maybe she (Moholi) decided to just step down."

Telkom's chairperson and several board members also departed following an annual general meeting last month.

Analysts have said the rejection of KT's offer underscored the government's determination to keep control of a company that many in the ANC view as a direct arm of the state.

Local media had said Moholi's predecessor stepped down because the government blocked him from making sweeping changes, including job cuts.

Mobile failings

Stung by declining fixed-line usage and an expensive, failed attempt at expansion into Nigeria, Telkom has struggled to boost flagging earnings.

It has launched an expensive mobile phone unit that has struggled to win customers in a market dominated by Vodafone unit Vodacom Group [JSE:VOD] and MTN Group [JSE:MTN].

The mobile business has yet to turn a profit two years after its launch.

Under Moholi, the company has lost more than half of its market value. The stock is down nearly 40% so far this year, compared to a near 20% gain on the JSE stock index over the same period.

Telkom did not give a reason for Moholi's departure and a spokesperson declined to comment further on the company's statement, which said operational abilities would not be impacted.

"It was quite difficult to carry on doing a job with everything that has been happening at the board and shareholder level," said Steve Minnaar, portfolio manager at fund manager Abax Investments.

"It is unfortunate because they are losing another experienced person."

Telkom shares were down 3% to R17.65 by 12:00 GMT, lagging behind a 0.4% decline in the broader All-share index.

 
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