Search begins for Maseko successor

Sipho Maseko’s surprise announcement that he will step down as CEO of Telkom next year has sparked questions as to the reasons for his impending departure, while opening up debate about who will take his place atop the fastest-growing mobile operator in SA.

Sipho Maseko’s surprise announcement that he will step down as CEO of Telkom next year has sparked questions as to the reasons for his impending departure, while opening up debate about who will take his place atop the fastest growing mobile operator in SA.

On Friday, Maseko, whose eight-year tenure at the helm of the group has seen it overtake Cell C to become SA’s thirdlargest mobile operator, said he will step down at the end of June 2022.

Shares took a 6% dive on the news, indicating displeasure at the prospect, especially as it is unclear why the Telkom head has given notice.

“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,” Maseko said in a statement. “I will stay on until June 2022 to ensure a smooth transition for my successor. I am most thankful to my colleagues across our country, for trusting me to lead Telkom, and for supporting me throughout this journey of transition.”

Maseko is likely to be remembered for his role in turning a decades-old fixed-line operator into a modern mobile network provider.

During his tenure, the group’s share price has risen 190% to date, reaching a high of almost R97 in 2019.

Maseko joined Telkom in April 2013 as Telkom grappled with technological changes that were pressuring its traditional fixed-line services.

“Under his leadership, the group has had many remarkable strategic achievements in its execution of its broadband-led strategy which are reflected in the group’s current healthy position,” Telkom said.

The mobile business — which now accounts for the lion’s share of total revenue — has more than 15-million customers, while Vodacom, SA’s largest operator, has 44.6-million local customers.

Maseko’s ability “to navigate the potential conflicts between having government as a shareholder and needing to significantly reduce its previously bloated workforce, as well as being able to change course to becoming a major mobile player challenging the two bigger players, will be his enduring legacy”, says Roy Mutooni, an analyst at Absa Asset Management.

Though Maseko has succeeded in these aspects, analysts had been expecting him to stay a little longer to see through a plan to realise the value of its underlying assets.

“I was not expecting it quite yet,” said Peter Takaendesa, head of equities at Mergence Investment Managers, pointing to an ongoing strategy by Maseko to separate out Telkom’s infrastructure unit Openserve as well as the masts and towers unit, Gyro.

While Telkom is valued at R22bn, the group estimates that the sum of its parts could be worth as much as R53bn, according to a 2020 investor presentation. Remgro’s telecoms infrastructure business, CIVH, is valued at R23.2bn, pointing to the sort of valuations that Openserve — a much bigger operation — could fetch.

With a strategy in place, the question is who will take on the task of leading its execution?

Unlike when Rob Shuter stepped down from the top job at competitor MTN, to be succeeded by Ralph Mupita, the line of succession seems unclear at Telkom.

The process to appoint a successor is “well under way”, Telkom said in a statement on Friday, with a replacement announcement not too far away.

One option is to bring in an outsider. Maseko himself had been at Vodacom before joining Telkom.

Internally, Maseko has surrounded himself with strong people who have been key in the company’s growth. One such contender is Serame Taukobong, heading up the consumer and small business divisions at Telkom.

“My best guess for an internal successor is Serame,” said

Mutooni. “He has been instrumental in the turnaround and growth of the group.”

Takaendesa, concurring that Taukobong is a likely candidate, said the successor will have to be “someone with strong operational experience, who knows how to monetise assets and understands the fibre business”.

The journey to replace old technology with modern alternatives continues.

To date, the number of homes connected with fibre exceeds the number connected with copper, Telkom said, with revenue now well diversified.

In Telkom’s year to endMarch, its subscriber base had risen by more than a quarter, while mobile service revenue had risen by just over a third to R16.9bn, making up almost 40% of group revenue.

In 2020 mobile service revenue had contributed about 29% of group revenue.

By the end of trade on Friday Telkom’s shares were 2.55% lower at R43.61, their lowest close in two months. The stock is 41% stronger over the past 12 months.