Jaring board surprised by timing of CEO resignation

• Board caught unaware by timing of CEO resignation
• Clarification sought over proposed sale derailment; Board must decide Jaring’s fate quickly

UPDATED WHEN Digital News Asia (DNA) first ran this story this morning, we said that the Jaring Communications board was surprised by the resignation of their chief executive officer Nik Abdul Aziz Nik Yaacob and on the ending of talks over the sale of the company to a nascent telco.

However Jaring Communications chairman Datuk Dr Md Khir Abdul Rahman has clarified to Digital News Asia that the board, "was only surprised at timing" of the CEO resignation.

"This is because the turnaround plan our ex-CEO structured is only just taking off," said Khir via text message. "In the interim I will make sure that Jaring will continue to focus on plans and activities which is value creation [for Jaring]." Khir, as we reported, is the interim CEO.

Meanwhile, Nik Abdul Aziz told Digital News Asia that he did inform the board and Khir of his intention to leave with a 1-month letter of notice. "Before that I had given them a verbal indication of my intention to leave if certain things were not done by the board," he said. 

The Malaysian Insider first reported that telecom firm Puncak Semangat has ditched plans to acquire Jaring, the country’s first ever Internet service provider (ISP), but has raided the government broadband company for top executives including Nik Abdul Aziz, ahead of the launch its 4G (Fourth Generation) or Long Term Evolution (LTE) service next year. However, Nik Abdul Aziz clarifies that he has not joined Puncak Semangat but the Al-Bukhary group. "I am however advising Puncak Semangat on certain things."

The online news portal also noted that Puncak Semangat, which is linked to logistics tycoon Tan Sri Syed Mokhtar Al-Bukhary, dropped its bid after due diligence on Jaring. It added that the Finance Ministry was said to have put a RM50 million (US$16 million) price tag on the company, which relies mainly on government contracts for its business.
 
A source close to the matter who spoke to DNA on condition of anonymity confirmed Nik Abdul Aziz’s (pic) departure to Puncak Semangat and added that Jaring’s board was currently trying to get confirmation, albeit unsuccessfully, as to whether Puncak Semangat was truly walking away from the potential acquisition.

Steward-less
 
A major difficulty facing Jaring on the back of this development is that it lacks the critical stewardship needed to steer it out of these trying times. DNA understands that before Nik Abdul Aziz’s departure, he was said to have been laying the groundwork for a backup plan for Jaring should no party decide to buy the ISP.
 
“If no one was keen to buy Jaring, Nik felt that it would serve everyone’s best interest if Jaring was folded back into the government, especially given its Mimos-type legacy and government-style culture,” said the source.

Jaring began life as a research project into integrated networking by a government agency known as the Malaysian Institute of Microelectronics Systems (Mimos), before evolving into an ISP and later corporatizing.
 
The source added that Nik believed that Mampu (the Malaysian Administrative Modernisation and Management Planning Unit), the government agency in charge of the civil service's IT needs, was the best agency to park Jaring in, in the event of that happening.
 
“Mampu already takes care of most of the Government’s disaster recovery centers, as it’s building its own private cloud infrastructure and offers disaster recovery services.
 
“These are areas well within Jaring’s capabilities,” said the source, adding that Jaring expects to save the Government some money too if it handles Mampu’s various network-dependant workloads.

According to Nik Abdul Aziz, there are only so many things he can do as CEO. "The stakeholders have to ultimately decide the way forward," he said, adding that the best option for Jaring is to fold under Mampu. 
 
Still a way out
 
According to a former senior Jaring executive, this news couldn’t come at a worse time for the ISP as its 350-strong workforce have had to deal with a series of body blows over the past year.
 
These include the lost of its SchoolNet business to YTL Communications’ 1BestariNet project, as well as the loss of the 1GovNet project, previously shared between four government-linked companies, including Jaring, said the former executive. 1GovNet will now be handled exclusively by GITN, a Telekom Malaysia owned subsidiary.
 
1GovNet will be a major loss as it contributed about 30% of Jaring's estimated RM120 million (US$38.5 million) revenue last year, added the former executive, who felt that Jaring could still be turned around but the key to this happening is for it to own and operate its own network (including fiber networks) rather than depending on other network players, including rivals.
 
“Jaring used to spend between RM70 million and RM80 million a year just on leasing infrastructure from the various players, some of whom it competes against. How do you survive in such a landscape where you have to compete with your service provider to win business?” he said.
 
Meanwhile, DNA's source said, “It’s decision time again over Jaring’s future. Keeping the status quo is not an option, as they cannot leave us as we are. Some firm decisions have to be made over Jaring's future.”
 
Logo courtesy of The Malaysian Insider

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