Shareholders in Telkom left hanging

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Nombulelo Moholi, the chief executive of Telkom, has denied rumours that she intends to follow the companys outgoing chairman and resign. Photo: Leon Nicholas.

Telkom chief executive Nombulelo Moholi has dispelled concerns and speculation that she could be the next manager to depart Africa’s largest fixed-line services provider.

Moholi has denied that she is planning to follow chairman Lazarus Zim, who leaves the company next month ahead of the expiry of his contract in August next year.

The stock tumbled as much as 8.11 percent in Johannesburg on Friday, extending the drop since Thursday to 13.1 percent, the worst two-day slide since May 2009, according to data compiled by Bloomberg.

It traded at R18.30 at the close on Friday, falling 5.52 percent lower in the session.

The share price performance mirrors Telkom’s financial performance, which will disappoint after it said on Thursday that earnings would drop at least 45 percent for the first half to September.

Minority shareholders and the South African public, Telkom’s largest shareholder through the government’s 39.8 percent stake, are none the wiser on the recommendations for a turnaround strategy.

Phumla Williams, a cabinet spokeswoman, said on Friday that options for Telkom were not discussed at the cabinet’s meeting on September 19.

Yet on September 17, Siya Qoza, the spokesman for Communications Minister Dina Pule, had said she would present her recommendations at that meeting. Her proposals would later be communicated to stakeholders.

Telkom is in limbo until there is progress on the strategy.

Moholi, who took over as group chief executive in April last year, said of her possible departure: “There’s nothing like that. Have you ever heard a quote from me saying that? All I can give you is I’m denying the rumour.”

Asked about talk that her relationship with Pule was affected by the minister’s alleged meddling in Telkom, she said: “I don’t know what you’re talking about.”

Internal and external sources have independently said Moholi was set to leave.

A source said a reason for outgoing chairman Zim’s early resignation was that he had wanted to fire Moholi as she was encroaching on his duties as chairman.

Another source said Zim had been tipped off from within the ranks at the Department of Communications that at Telkom’s annual general meeting on October 24, shareholders were set to pass a vote of no confidence in his ability as chairman.

“Some people in government are influencing some people to take Zim out. Pinky [Moholi] wants to resign, maybe in two or three weeks. It could be a month,” the source said.

“The minister and leadership of Telkom are not in agreement. Lazarus did not want to be embarrassed. He wanted to save his image.”

Zim said on Friday that he was leaving Telkom prematurely for personal reasons that he “wouldn’t want to [discuss] at this stage”.

He denied that he had any intention to dismiss Moholi and said the pair shared a “very good” relationship. He described her as a “very capable and ethical” leader.

He quashed the rumour that she was visiting the ruling party to lobby against him, saying: “There was no lobbying. We don’t lobby. She runs a business. Why would you say she is lobbying? I think you’ve got the wrong end of the wicket. There are no issues between me and the chief executive… who I respect. The feeling is mutual.”

According to the source, Moholi is lobbying politicians and has met with President Jacob Zuma and is known to frequently visit Luthuli House, the headquarters of the ANC, which endorses the appointment of Telkom chief executives. The ANC is widely perceived to be in favour of nationalising Telkom.

Zim said he had a professional relationship with Pule. “She respects me and I respect her. We’ve both got jobs to do.”

Telkom’s annual meeting may provide insight into the status of these relationships.

Business Day reported last week that a board shake-up was possible and that fund manager Allan Gray, which holds 11 percent of Telkom, had proposed controversial resolutions and posed strong views on the quality of Telkom’s board members.

Shareholders will have the opportunity to vote on two government-appointed members who are up for re-election.

The government had special rights which expired last year, to appoint a chairman and five board members.

Additional reporting by Bloomberg


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