It's all been happening in the telecommunications industry - management turmoil, executive poaching, soaring share prices, political intrigue, lawsuits and regulatory scrutiny. And much of it has involved incumbent fixed-line operator, Telkom, which is the top telecom company in this year's Top Companies survey (as ranked by net profit).

The most intriguing event of the past 12 months was undoubtedly the unceremonious departure in early April of Telkom CEO Papi Molotsane. Sources say Molotsane, who had been appointed to the job only 18 months earlier, was given his marching orders by the board. There has been much speculation about why Molotsane left - two separate sources have alleged that there was corruption involving the company's acquisition earlier this year of Nigeria's Multi-Links - but board chairman Shirley Lue Arnold has so far provided no comment on these allegations.

Some observers have suggested that Molotsane was put under pressure by government, which was unhappy with his decision to sign a supply agreement for the construction of a submarine cable system along Africa's east coast, known as the East Africa Submarine System (Eassy).

Still others say Molotsane's management style was abrasive and alienating and point to the fact that two top Telkom executives - chief sales and marketing officer Wally Beelders and chief technical officer Thami Msimango - quit the company shortly before Molotsane's exit. Beelders and Msimango have joined Vodacom, which is 50% held by Telkom, where they have taken senior management positions in the cellphone giant's new Internet service provider (ISP) business.

Telkom stalwart Reuben September, formerly chief operating officer, has been appointed acting CEO until a replacement is found.

Telkom's share price shot up on news of Molotsane's departure, touching a new high in late April. Analysts had long expressed concern at Molotsane's management style and lack of telecom experience - he'd been a group executive at Transnet and before that CEO at food group Fedics.

Most analysts, on the other hand, have welcomed the appointment of September as acting CEO. He has deep institutional knowledge of Telkom, having joined the company in 1977.

Telkom's new full-time CEO will face a radically altered and much more competitive telecom environment. These are some of the challenges:

• Second network operator Neotel has been licensed and plans to begin offering its services to consumers this year. It has promised simplified, competitively priced products and good customer service, an area Telkom, especially in its call centres, needs to sharpen up. Neotel is promising to turn voice telephony, an important revenue and profit area for Telkom, into a commodity.

• ISPs are expected to soon be granted the right to build their own access networks using a wireless broadband technology known as WiMax. These networks would allow them to circumvent Telkom's access network - the copper cables that link consumers to their nearest telephone exchange - and provide Internet and telephony services directly to consumers over their own infrastructure. If Telkom wants to compete it will have to ensure that customers can get broadband lines installed quicker.

• Mobile operators MTN and Vodacom see the opportunity to provide services that compete with Telkom and large corporate-focused ISPs. The Electronic Communications Act affords them the right to deploy their own fixed-line connections and they may do so to provide high-speed, leased-lines to big companies, in direct competition to Telkom. MTN has an ISP business in MTN Network Solutions; Vodacom is building an ISP business of its own.

• The market for international bandwidth, until now dominated by Telkom, is about to be opened to greater competition. Companies are lining up to invest in Eassy, which will link SA with cable systems in the Middle East when it goes live towards the end of 2008. Other cable projects are on the cards, too, with Neotel interested in investing in a proposed system called Seacom, which apparently enjoys the financial backing of private equity giant Blackstone. Seacom will also run along Africa's east coast but may instead connect to India, rather than the Middle East.

Another challenge that will face Molotsane's successor will involve balancing the demands of private shareholders with those of government. Government has expressed its intention to exert greater influence on the company in an effort to get prices down. Government, which owns 38% of Telkom, has repeatedly criticised high telecom prices, describing them as a barrier to investment in call centres and other hi-tech industries.

Telkom understands that all these pressures could have a bearing on its revenues and earnings in the years ahead and is moving to broaden its business into new areas to compensate.

At the time Top Companies went to press, Telkom was still pursuing IT group Business Connexion and waiting to hear if the deal would get the blessing of the competition authorities. If the deal is blocked by the competition tribunal, Telkom has said it will look internationally for a suitable IT acquisition.

Telkom is also pushing ahead with plans to create a powerful pay-TV group that will compete with MultiChoice's DStv and other, new pay-TV licencees. A new subsidiary, Telkom Media, created to house the business, has access to as much as R7,5bn in debt financing and plans to launch satellite and Internet-based pay-TV services within 12 months of securing a licence. Telkom Media is a joint venture between the fixed-line operator and Anant Singh's Videovision Entertainment.

The third leg to Telkom's strategy to broaden its revenue streams involves offshore expansion. It has already bought two telecom groups in Africa, Africa Online and Multi-Links, and has indicated that further acquisitions are on the cards.

Telkom is well behind MTN in securing assets north of the border. The cellphone group, which is placed second in the telecom sector in the Top Companies survey, has become one of the world's largest emerging-market telecom operators. MTN's US$5,5bn acquisition of Investcom is paying off in spades. In results for the year to December 31 2006, it grew its subscriber base by 73% to more than 40m. Even without the Investcom deal, MTN's subscriber numbers would have risen by 36%.

The group has subsequently added millions of additional subscribers. Nigeria is again proving to be the star performer for MTN, where margin, measured using earnings before interest, tax, depreciation & amortisation (Ebitda), rose to 57% from 53% through cost-cutting.

Group revenue in 2006 was up 49% to R52bn and Ebitda climbed 53% to R22bn, delivering an Ebitda margin of 43,4%.

Group CEO Phuthuma Nhleko says MTN lost a bid earlier this year to Kuwait's Mobile Telecommunications Co (MTC), to become Saudi Arabia's third cellphone operator, though Nhleko said at the time the group is "comfortably happy" to have lost to MTC's rich US$6,1bn bid.

By the end of 2007, Nhleko wants to have added 16m subscribers - a 41% growth in its December 2006 base. Growth is expected to come from Iran (5,5m subscribers), Nigeria (3,5m), SA (2m), Ghana (900 000) and Sudan (850 000) and 3,8m from other operations.

Those are numbers of which Telkom can only dream at this stage.