Telkom bonuses under fire

Johannesburg - A fund manager has lashed out at fixed-line telecommunications operator Telkom for poor returns on R31bn in capital expenditure and its proposal that shareholders approve early vesting of shares for staff.

Speaking on Talk Radio 702 and 567 Cape Talk's World at Six programme, Stanlib fund manager Zwelakhe Mnguni said Telkom management had "spent R31bn in capex and acquisitions over four years and have very little to show for shareholders.

Mnguni said Telkom management had admitted that returns on all projects - including its next-generation network, its Multi-Links acquisition and pay-TV licenceholder Telkom Media - are negative.

On Wednesday, Telkom said it will wind up its media subsidiary, Telkom Media, after failing to find a buyer for its stake in the business.

In a circular to shareholders issued on March 2 regarding its sale of a 15% stake in Vodacom, Telkom also asked shareholders to approve the early vesting of shares for management

According to the circular, there were 11 805 854 shares allocated to employees as at the end of December 2008, which are scheduled to vest in 2009 and 2010.

Telkom asks that the shares be transferred to employees on the record date for the unbundling of Vodacom, which is due to list on the JSE on May 5.

"This will come at a cost of R862m to shareholders," said Mnguni. "R862m is a lot of money for shareholders to forego for poor performance. We are unhappy with this proposal and will certainly be voting against it. It's very concerning for me as a shareholder."

Mnguni noted that Telkom's market capitalisation on the JSE is around R54bn: "They [management] have already spent around R30bn on projects which are not yielding a return. They intended spending R55bn over next five years, and said last week that his would be reduced to R47bn.

"A lot of value destroyed, and there is potentially a lot of value destroyed going forward," he said.

Shareholders are due to vote on Thursday at the company's annual general meeting.

- Fin24.com