Johannesburg - Telkom’s board of directors is proposing to reduce the cap on the number of ordinary shares it can repurchase in a financial year to 10 percent from 20 percent as it introduced several last-minute amendments to appease shareholder concerns ahead of its annual general meeting today.
Another proposal to be tabled for voting is the reduction in the number of ordinary Telkom shares that can be granted to directors, office bearers and other employees who are in the employee forfeitable share plan to 26 million, or 5 percent. This is half the present allocation of up to 10 percent, or 52 million, of the JSE-listed firm’s issued ordinary shares.
Shareholders will also have to vote on the recommendation to provide financial assistance only to directors, prescribed officers and other employees who acquire Telkom shares according to the employee share plan, and not to any person, company or entity that is related or inter-related to them.
“Having given due consideration to shareholder inputs, the board has decided to limit the scope of the authority that would be conveyed by these resolutions to provide more comfort to the shareholders,” the board said yesterday.
Years of value destruction, poor investments and decision-making have weakened the confidence of investors who may demand better performance from leadership at the fixed-line services provider to justify the large salary packets.
Over the 12 months to March Telkom increased its pay to its executive management team of 33 by nearly 59 percent to R128.8 million. Meanwhile, operating revenue shed 1.7 percent to R32.5 billion, operating expenses grew 2.7 percent to R25.7bn and headline earnings declined 73.2 percent to R444m.
Telkom’s new board and management are under pressure to stabilise and turn around the company while seeking new growth opportunities. It has begun a process to downsize its bloated labour force of about 20 000, eliminate inefficiencies by reviewing contracts and selling properties, and untangle the firm from competition and legal woes.
A deal to sell 20 percent to South Korea’s KT Corporation in exchange for a R3bn investment, skills and technology expertise was scuppered by the government last year.
Abri du Plessis, the chief executive of Gryphon Asset Management, said the announcements were important to Telkom’s future but they did not overshadow the concern over its long-term viability in a fast-paced and cut-throat information and communication technology environment.
“I’m concerned about the company and its long-term viability in the market. We need some innovation coming back into the group.”
David Couldridge, the senior investment analyst at Element Investment Managers, said massive challenges lay in store regarding its operations.
He added that the change in regime at Telkom was evident in decisions by the board, such as the recommendation that long-serving director Jeff Molobela retire and not be re-elected at the AGM, despite offering himself for re-election.
“The board wishes to reconstitute itself by injecting fresh skills appropriate to the growth trajectory the company will be pursuing as part of its turnaround objectives,” the board said. - Business Report