Telkom confirms Hedberg's resignation

Telkom group acting CEO Jeffrey Hedberg will not renew his contract with the fixed-line incumbent in March, throwing in the towel after only a seven-month tenure at the helm.

Telkom spokesperson Pynee Chetty confirmed Hedberg's resignation early this morning: “I confirm that Mr Hedberg has decided not to renew his contract at the end of March this year. However, he remains committed to the Telkom team and all of the company's stakeholders until the end of his term.”

While no reason has yet been given for his unexpected resignation, ITWeb initially speculated that Hedberg's days were numbered, ahead of the expiration of government's special class A shareholding in Telkom in March.

Government currently has a 39.8% shareholding in the fixed-line operator. Its Class A shareholding status gives it special privileges over other shareholders, including the right to appoint five out of 12 directors to the board. These include the chairman of the board.

While only the board can make the final decision on the appointment of a permanent Telkom CEO, government's influence on the Telkom board cannot be ignored.

Analysts speculated government may want to flex its muscles by appointing a permanent CEO of its choice before it loses the right to do so.

Thus analysts were in agreement that Hedberg was unlikely to be government's first choice for the top position, especially because Hedberg's turnaround strategy is still in its infancy.

Absa investment analyst Chris Gilmour pointed out that government will likely seek a candidate in line with its affirmative action agenda, which would count against Hedberg.

Ovum senior analyst Richard Hurst concurred, and argued that government may vote with its heart instead of its head. Hurst maintained Hedberg may be the right man for Telkom, but may not necessarily fit the profile for government's agenda.

But Hedberg has now removed himself from the equation, which will increase pressure on government to install a permanent CEO as soon as possible.

Meanwhile, Telkom will now have yet another leak to plug in its sinking ship and government may be the cause.

Hedberg took up the acting CEO role in July last year after the abrupt departure of then CEO Reuben September. Telkom CFO Peter Nelson announced his unplanned departure shortly afterwards.

At the time, speculation was rife that government involvement was the main cause of the talent exodus at Telkom.

“Essentially, the cracks are beginning to show and we have always maintained that government should not have a role in the telecommunications industry. Now their interference at the highest level has highlighted how non-productive it can be,” argued WWW Strategy MD Steven Ambrose.

However, Telkom previously hit back at suggestions that it was under government's thumb, arguing that its board acts in the interest of all its shareholders, not only government.

Nonetheless, it cannot be ignored that the timing of Hedberg's resignation coincides with the expiration of government's special share in Telkom.

Hedberg's appointment was welcomed by industry commentators who believed the famed turnaround specialist would be the right man to turn Telkom around.

He took up the leadership position in turbulent times for the company as revenue was all but flat in the year to March, and several areas of its operation need urgent attention.

Despite the challenge, Hedberg introduced a five-point strategy and has achieved some successes in his short tenure.

Over the past six months, Hedberg has been instrumental in the launch of Telkom's mobile arm, 8ta, as well as the company's decision to pull out of its CDMA business, Multi-Links, in Nigeria.

Hedberg has also prioritised fixing local operations before embarking on African expansion.

Telkom went to great lengths to secure Hedberg, having to wait several months before he could come on board due to contractual agreements with Cell C.

Gilmour previously said Hedberg is technically competent and renowned as a turnaround man after the work he did at Cell C. The fact that Telkom had to wait several months before Hedberg could start work on Multi-Links implies the company desperately wanted him.