Unwarranted trust deficit in TM

THE recent developments in Telekom Malaysia Bhd (TM) border on governance issues and underline the continued trust deficit that government-linked companies (GLCs) suffer from the Pakatan Harapan-led federal government.

Firstly, it would come across as chairman Rosli Man (pic), who was appointed in December last year, having firm control over the board and playing a key role in the appointment of important positions. He held court and stamped his authority as TM’s chairman in the run-up to the appointment of the new managing director (MD), Datuk Noor Kamarul Anuar Nuruddin, on June 13.

The board had in November last year recommended to the special shareholder, the Ministry of Finance (MoF), that acting group chief executive, Shazril Imri Mokhtar, be made the new chief executive.

When the recommendation was made, Rosli was not on the board of TM yet.

On Feb 28, the MoF sent a letter to Imri agreeing to his appointment as group chief executive. Rosli and the company secretary were copied the letter from the MoF. Sometime in March, however, the Prime Minister’s Office (PMO) put a stop to the appointment of Imri.

Rosli said that he was told by the PMO to defer the appointment of Imri, a decision he relayed to the board in March.

What’s perplexing is that the details on why TM had been without a permanent CEO for the past one year was only disclosed on May 31 after a story on the board and the chairman being at loggerheads on the appointment of a new CEO became public matter.

Subsequently, Noor Kamarul was appointed MD, while Imri went back to his role as chief operating officer (COO).

It’s clear that the appointments of the chairman and the MD came from one entity - the PMO. It is rather unusual for the PMO to micro-manage the appointment of the CEO of TM. Normally, such decisions are done at the board level.

This is the second time that the PMO has intervened in the appointment of top officials in GLCs. The first was the appointment of the new financial controller in Petroliam Nasional Bhd (Petronas). The announcement of Tengku Muhammad Taufik Tengku Aziz replacing Datuk George Ratilal came from the PMO instead of Petronas.

It is understandable if the PMO influences the appointment of board members, including the chairman in GLCs, but going down to the level of even managing the appointments of CEOs and CFOs is unprecedented and unwarranted.

It blurs the separation of powers between the board and the management. This goes against the grain of corporate governance, which is the bedrock of the GLC transformation programme that started in 2005.

What’s more damaging is that it underscores the fact that Putrajaya and the PMO do not believe that the boards and management of GLCs are competent enough to identify and appoint key people to head GLCs.

There is a trust deficit and it is not healthy.

On the face of it, Khazanah Nasional Bhd and the PMO may be the same because ultimately, the MoF, which takes instructions from the PMO, controls Khazanah.

However, for international investors, it is not the same.

Khazanah, as the sovereign wealth fund, is supposed to dictate key appointments to manage GLCs. It is the same in any listed company where the shareholders and board members decide on the appointment of the CEO.

Considering that Noor Kamarul’s appointment came from the PMO, is he answerable to the board which did not have a role in his appointment? Is he answerable to Khazanah, which is the single largest shareholder in TM?

Apparently, the need for a completely new team to helm TM is for the top management to infuse new strategies and look into some of the old deals done by the previous management.

Towards this end, TM needs to up its game as it faces challenges in staying profitable by providing faster broadband connectivity at half the price. It is said that it is better to implement new strategies with a new team as they come without any baggage.

According to industry officials, TM needs to shed as many as 10,000 employees if it is to improve its profits, as prices for broadband services continue to drop. TM also needs to contend with new strategies on how it would position itself when 5G comes into play, as it is supposed to be faster than fixed-line broadband.

The new team at TM already has its hands full. The excuse for a new team at the helm to needle into past transactions seems to be taking the initiative for change a tad too far.

All past transactions had already gone through auditors, board members and in some instances, the shareholders as well. If there were any wrongdoing, it would have showed up by now.

For instance, one of the past deals being talked about is TM’s purchase of Packet One Networks (Malaysia) Sdn Bhd from Green Packet in 2014 for more than RM600mil.

The transaction essentially involved the issuance of new shares, whereby fresh money went into expanding and growing Packet One’s LTE wireless network and reach.

None of the major shareholders exited. TM ended with 56.8% of Packet One while Green Packet’s effective stake was diluted to 30%. The rest was held by SK Telecom Co Ltd, which is South Korea’s biggest mobile cellular services provider.

The transaction was completed five years ago. If there were any discrepancies, they would have surfaced by now.

At that time, speculation was rife that Digi.com Bhd was eyeing Packet One for its LTE-4G spectrum.

If a deal had been done between Packet One and Digi, would there have been any aspersions cast? It would be highly unlikely.

At the moment, Axiata Group Bhd is looking at a merger with Telenor’s Asian operations. So far, there have been no aspersions cast on the transaction except that it would cause a lot of people to be without jobs.

Why is it then that in the case of TM, there seems to be a view that all past deals could have discrepancies? Why the trust deficit?

It does not help build a company that depends a lot on its employees.

The views expressed here are entirely the writer’s own.

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