The recent appointments of Telkom’s new CEO and COO – Sipho Maseko and Dr Brian Armstrong, respectively – have largely been welcomed by the market, but analysts have placed the ball squarely in government’s court, saying the state now needs to plot a course of the ailing company.

The market’s positive reaction to the appointment of the two senior executives is mainly based on the fact that Armstrong – a 25-year ICT veteran – has the experience and ability to lead Telkom, and is expected to make up for the relative inexperience of Maseko. Maseko, while an experienced business leader in his own right, has had limited exposure to the telecoms sector. He previously held the position of MD of Vodacom for less than a year.

However, while the change of guard has been welcomed, and even some optimism has been expressed about a stronger board being put in place, it appears that government remains the monkey on Telkom’s back that the fixed-line incumbent is just not able to shake.

The state is Telkom’s largest single shareholder, holding a 39.7% direct and another 10.6% indirect interest though the Public Investment Corporation. Government has repeatedly been accused of interfering with the running of Telkom.

In fact, last June, the market’s outcry reached a new intensity, when communications minister Dina Pule" rel=tag>Dina Pule pulled the plug on a potential deal with Koreabased KT Corporation, which would have seen Telkom issue 20% more shares in return for an initial R3.3 billion injection.

While market observers interpreted this as a sign that government did not feel that it would reap sufficient benefit from the deal, it seems that the drop in Telkom’s share price – just before the deal was to be signed – has largely been ignored. In reality, the share price decline, from the time when talks with the Koreans started to when the parties were ready to sign on the dotted line, would have seen the deal discounted by some R1.7 billion. So perhaps there is a case to be argued for government’s intervention in this instance.

Since canning this deal, however, which would have been central to Telkom’s turnaround strategy, the Department of Communications announced it would report back to Cabinet with options for a turnaround plan for Telkom. This has yet to happen and analysts have identifi ed the delay in directional clarity as the biggest stumbling block faced by Telkom in terms of moving forward.

It is understood that this clarity – in the form of a strategic plan for the future of the business – is imminent, however, it is likely that any plan conceived with government’s involvement will be received entirely without suspicion.

Perhaps the time has come for the state to let go of Telkom. Then again, the odds of that are about as high as hell freezing over.

Happy reading!

Martin Czernowalow