Will CEO still get to unbundle Telkom?
Sipho Maseko's departure from Telkom in June next year after what will be more than nine years as CEO has raised the question of who will oversee the long-anticipated unbundling of the JSE-listed company - Maseko or his successor.Telkom's subsidiariesinclude mobile and fixed-line, the fibre division Openserve, data centre business BCX, and the mast, tower and property division Gyro. This indicates that Telkom, which now trades at about R43, is undervalued and there is potential to unlock value through listing some divisions or bringing on board strategic partners.Maseko is credited with turning around Telkom. When he was appointed CEO in April 2013, Telkom had 21,000 employees, a declining fixed-line business and a minor, loss-making mobile segment. The group is now profitable, and its mobile and fibre segments are the dominant divisions. Its workforce is now about 7,000. Including staff at BCX, which Telkom bought in 2016, the group's total complement is about 11,000.Peter Takaendesa, head of equities at Mergence Investment Managers, said the "one piece of the puzzle that is still missing" is the "value unlock" for shareholders, either through separate listings of the various parts of Telkom or bringing in outside investors in some of these units. He said that until now Telkom has been valued unfairly as a "boring, declining fixed-line operator" and the value that could be gained could be double the value of the group's current share price."We would have expected [Maseko] to see that through to completion. What we don't know is that, with him exiting in June, does that mean that some of those things or most of them would be completed by him? He has completed the operational turnaround but now we would expect that asset value realisation to be done to complete the picture." If the unbundling is not finished by June, whoever takes over will have to "continue and complete that part".The next big step for Maseko's successor will be to continue growing Telkom's mobile and fibre businesses and find new services to add to existing divisions, such as financial services in the mobile business, he said. Protea Capital Management analyst Richard Cheesman said the new CEO could try to put together a "proper bundled package" including TV streaming, fibre and a mobile contract similar to those that are common in overseas markets. No-one in SA has yet succeeded in doing this and there may still be potential in this area. Takaendesa said: "When [Maseko] took over it was a declining fixed-line business, which made up over 90% of the group's revenues. They had a small subscale mobile business that lost almost R2bn a year. Everything was moving in the wrong direction and the cost base was too high. It was almost like a perfect storm."Takaendesa said the cut in headcount during Maseko's tenure helped address the large cost base. And the drive to grow the group's mobile business by focusing on mobile data saw it delivering close to 50% of Telkom's revenues from less than 10% when Maseko started. The last reported annual operating profit from the mobile business was more than R5.6bn. In a statement Maseko said: "I feel now is the right time for me to step aside and make way for a new leader who will take Telkom to even greater heights."Telkom said the process to appoint a successor is "well under way".