Telkom poised to ring the changes

In an interview with Business Times, September talked about his five-year vision, responded to criticism of his leadership style and allegations of tender irregularities, and said the company would return to its “core business” after ditching Telkom Media.

September, 51, added that revitalisation plans would see Telkom's revenue and margins coming “under pressure” in the short term.

“As previously indicated, transformation plans would ensure that, in the long term, the company has as many new streams of profitable revenue as possible.”

He said the next two years would be “all about delivery” to customers, stakeholders and shareholders, but he could not discuss specifics as the company is in a closed period ahead of its results.

He said the potential for growth, in Africa in particular, was huge as Telkom would no longer be hindered by its shareholder agreement with Vodacom. Telkom owns 50% of the cellular giant, but recently agreed to sell 15% for about R22.5-billion and unbundle the remaining 35% to its shareholders.

“The negotiations and subsequent deal with Vodacom will set us free on a strategic and operational level and is central to our transformation process,” September said.

To this end, September said, at least half of the expected R22.5-billion — after paying taxes and net attributable debt — would be ploughed into the company's “defend-and-grow strategy”. The remainder would go towards paying dividends.

September said Telkom shareholders could expect “a further opportunity to participate in a growing market” when Vodacom lists on 18 May, 2009.

September said Telkom planned to invest primarily in its fixed-mobile strategy, data services and geographical expansion. It presently operates in 35 African countries.

“We have a significant presence in Africa already through MWeb Africa, Africa Online and Multi-Links,” September said. “In some areas we own infrastructure while in others we provide customer services by using the capacity of other operators. So we have a good launching pad to expand.”

Telkom's biggest threat is MTN, which has a huge presence in Africa and the Middle East.

“We want to be the preferred ICT service provider in Africa and we have a three-to five-year objective to achieve this,” September said, and pointed to the recent memorandum signed with US telecommunications giant AT&T.

While he refused to comment on the financial benefits, it is understood that the parastatal hopes to earn additional revenues of between 30-million and 40-million a year initially.

“As part of this deal we will be utilising each other's strengths in markets we are involved in via our international networks and services,” September said.

Moving to the welter of allegations of tender irregularities at the company, September said these had caused “reputational damage which we are in the process of setting right”.

He added, though, that there was nothing untoward in the company's tender and procurement procedures, and that they were constantly under review.

“Telkom has a huge amount of procurement activities ... many of which are complex and I can never say that something might not go wrong.”

This week, Telkom scored a major victory after being given permission by the Johannesburg High Court to award a controversial R2-billion tender to Ericsson.

The deal had been halted by a losing bidder which claimed, among other things, that September enjoyed a close relationship with executives at Ericsson.

Said September: “The relationship with all stakeholders...is an important aspect of our business. My relationship with them (Ericsson) is of a strategic nature and I will continue to maintain them. I also expect this of Telkom managers and other staff.”

He added that there were always “losers” in tenders. “Therefore we have feedback meetings with unsuccessful bidders as part of our processes. ”

September said he had brought auditing firm KPMG to review “possible procurement gaps and (to ensure) the maintenance of (corporate) governance standards”.

With regards to Telkom Media, September said the company had decided to “reduce significantly or terminate” its involvement in the ambitious project.

“We are in the content delivery business, not necessarily in the content development business ... and we simply needed, at this time, to adjust our plans in terms of our core business.”

September said that an international buyer had been found, but that the deal had collapsed.

Commenting on criticism surrounding his turnaround strategy, September insisted that it was “workable and achievable, is being executed and will take Telkom to new heights”.

On questions over his leadership capabilities and constant rumours that two former cellular executives are openly touting for his job, September said: “There will always be speculation, but I cannot allow myself to be distracted, given the enormous task at hand.”

Source: Business Times

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