A month before Jeff Molobela took over as chairman from Shirley Arnold at Telkom in November last year, he started meeting the 12 board members individually. The meetings were lengthy enough for the board members to raise concern about two albatrosses ? the launch of its mobile service and its loss-making Nigerian subsidiary Multi-Links

"It (Multi-Links) could sink Telkom," he was told. They were right. It has emerged that Multi-Links made a loss of R659-million in the latest financial year, and is still bleeding cash.

Molobela was worried and wanted to get to the bottom of what was ailing Telkom. He not only went through the minutes of the past three board meetings, he also asked to see the board's resolutions of the past five years. And he had brief meetings with the executive team and attended strategy meetings.

While it started cordially, his probing was soon interpreted as interference by some board members, while the market viewed it as him angling to get the CEO position. As chairman, Molobela is a nonexecutive director and according to the King 3 codes of corporate governance, he should not be involved in the day-to-day functioning of Telkom. Being a Telkom director alone can be an extraordinarily demanding job. Mark Lamberti, who stepped down as a Telkom director after a year on the board, is on record saying he attended 89 meetings, including 44 board meetings in a year.

Interfere in how Telkom is run

Interference from the board and, by virtue of its majority shareholding, government has been one of the structural problems any Telkom CEO has had to inherit. Molobela has already been blamed for CEO Reuben September and financial director Peter Nelson resigning. But he is adamant he was just trying to learn the nuts and bolts of the business ? not interfere in how Telkom is run.

Molobela arrived six months after Telkom had disposed of its 50 percent holding in Vodacom while it got R22-billion for the sale of its stake to UK giant Vodafone, it lost its main cash cow. The plan was to use the proceeds to fund expansion into other areas, such as mobile. But even before the Vodacom deal, it was struggling to find new revenue streams.

Back in 2006, under the leadership of Papi Molotsane, an affable outsider, Telkom entered the pay-TV market, launching Telkom Media. It turned out to be a disaster, with Telkom having to write down R471-million in loans.

At the time Telkom management and the board were divided about Molotsane as a replacement for Sizwe Nxasana. The board eventually won the battle and Molotsane left under a cloud in April 2007.

Telkom's appetite for pay-TV waned under September, and Telkom Media was sold in May 2009 for R68-million to Chinese investors Shenzhen Media SA.

The natural successor

September's appointment was seen as a return of the old guard. He started at the telecoms operator when it was still the department of posts & telecommunications in the 1970s and worked his way up as COO under Molotsane.

He was the natural successor for the top job but the board dithered and only made him CEO seven months after Molotsane's departure. Under September, Telkom continued its efforts to find new revenue streams but failed to get any lasting footholds. The launch of its wireless broadband service in 2009 has not attracted a big following ? only 16 299 subscribers by the end of March 2010.

It is now investing about R6-billion over the next three to four years to launch its mobile service, but with revenues declining, analysts are worried about it placing further stress on margins. Not only are its new ventures not gaining traction, it is also facing stiff competition from MTN and its former subsidiary, Vodacom. The mobile operators have eclipsed Telkom in numbers. MTN, Vodacom and Cell C have a combined total of 46.3 million subscribers, compared to Telkom's 4.2 million.

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