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Kenya Telkom to Send Half of Its Workers Home

Date: 1/24/2008 12:54:29 PM

More than half of Telkom Kenya employees are to be laid off over the next two weeks as the lossmaking firm starts implementing a plan expected to help it return to profitability.

The Business Daily has established that the Telkom Kenya management will from tomorrow start issuing retrenchment letters to its 4,000 employees whose last working day has been slated for February 8. The staff numbers currently stand at about 7, 521 after it sent home 9, 767 last year, earning the firm the distinction of having retrenched the most workers in Kenyas corporate history within a span of eight months.

The completion of this project marks the beginning of a major make over of Telkom Kenya under the new chief executive, Mr Dominic Saint Jean, who took over the top job in December after France Telecom bought the firm.

The layoffs will save Telkom Sh4.2 billion in labour costs annually.

Mr Saint Jean refused to comment on the story.

With this round of layoffs, Telkom will have retrenched 14,100 workers, in an ambitious turnaround plan that led to the government selling 51 per cent of the parastatals shares to France Telecom for Sh26 billion. The layoffs, which have costs taxpayers over Sh10 billion, were a precondition for the sale.

Telkom has over the last decade been performing poorly because it has been heavily cannibalized by mobile phone firms and shackled by a bloated workforce, high cost structure, high debt load and a cash flow crunch that has prevented it from investing heavily in infrastructure to ward off competition.

At the end of the exercise, the once overstaffed firm will have 3, 150 employees on its payroll, a far cry from the 17,288 workers last February.

Besides reducing staffing costs by about Sh350 million per month, the layoffs are geared at boosting efficiency by having the appropriate human resource skills.

This comes at a time when the firm is preparing to head off competition from other operators in the increasingly competitive telecoms market.

The strategy of sending home 4, 000 employees is a departure from an earlier plan which had proposed to stagger the retrenchment over a period of between nine and 12 months.

This had been fronted by consultancy firm PricewatehouseCoopers on the grounds that this could only happen after complete automation of the firms systems besides going big into outsourcing.

Sources at Telkom Kenya said the France Telecom led management refused to buy the argument and opted for the oneoff retrenchment even after agreeing to it when they come on board last December.

The move could sour relations with Telkoms workers union.

"The union is against the mass retrenchment because its being done against its wishes and what was agreed earlier," said Mr Paul Nyaema, an official.

He expressed fears that the management might go back on the compensation terms agreed earlier given that they had changed tack on the retrenchment schedule.

Under the compensation package agreed earlier, each worker would be given a two month salary, two and half salary for the years worked, a golden hand shake of Sh150, 000 and a transport allowance of Sh40,000.

Payment for the job cuts amounting to Sh3.8 billion would be shouldered by the Government after it struck a deal with Telkom Kenya to clear all its debts in exchange for Telkoms 60 per cent stake held in Safaricom.

Once the retrenchment deal is done, the remaining employees stand to earn a pay increase that will push Telkom Kenya to the top 25 best paying in the country, putting it in the same league with its rivals Safaricom and Celtel, a move informed by a need to hold on to the best brains at a time when human capital is emerging as the most sought after resource in the local telecoms market.

The job cuts comes a time when the new management at Telkom Kenya is keen on a strategy that will see it cuts costs besides growing its stagnant revenues, a strategy that the firm hopes will push the loss making firm to the profit zone in less then two years, and to champion it to the top of the telephony market in five years. For growth, the new majority shareholder is banking on Telkoms newlyissued mobile licence that will allow it to take on Safaricom and Celtel head on.

The entry of the French firm into the mobile telephony market is set to trigger a shift in the market structure, which Safaricom which controls about 80 per cent of the local telephony subscriber market, or eight million subscribers currently maintains a near stranglehold. This has turned it into the most profitable company in East and Central Africa, with net profits of Sh12 billion in 2007 on revenues of Sh47.4 billion.

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