TELKOM KENYA TAKES SECOND STEP TO STOP FINANCIAL BLEEDING BY CUTTING 6,500 STAFF
At the stroke of a pen, Telkom Kenya has laid off 6,500 workers in one of the biggest retrenchment exercises under President Kibaki's Government. When The Standard visited Teleposta Towers in Nairobi, some of the workers aged below 35 pondered over the fates of their young families, as the Government appeared to have set the second phase of the restructuring process in motion.
The first phase of the restructuring of Telkom Kenya was effected in May last year, when some 3,000 employees aged 50 years and above were retired.
The retrenchment takes off after a consortium of eight local banks got together to advance the company the money ahead of the Government raising the money from the Safaricom IPO. The banks advanced the State corporation Sh5.8 billion to roll out the second phase of the programme even though reports indicate that the parastatal needs to raise a further Sh8.4 billion to finance its pension scheme.
The Kenyan units of Barclays Bank, Standard Chartered Bank, South Africa's Standard Bank and Kenya Commercial Bank advanced the loan. Others were NIC Bank, CFC Bank, Commercial Bank of Africa and East African Development Bank.
Telkom is expected to repay the loan by the end of one year, with lenders holding shares in leading mobile phone company, Safaricom, as security. Safaricom is a joint venture between Telkom and Britain's Vodafone Plc, with Telkom owning 60 per cent and Vodafone 35 per cent. Vodaphone agreed to waive its pre-emptive rights in Safaricom to allow Telkom Kenya to borrow from the banks.
The Government is expected to float 25 to 26 per cent of Safaricom in an initial public offering this year to raise money to repay the debt from the banks. When the retrenchment plan was mooted, it was expected that it would be financed by the sale of the company's nine per cent stake in Safaricom to Vodafone.
However, the plan was shelved after Treasury and the British company failed to agree on shares valuation. Instead, the two entities mandated the Government to seek alternative sources of funding from the market.
Under the retrenchment programme, workers will be sent home with two month's salary, a severance pay equal to two-and-a half-month's salary plus Sh150,000 and Sh40,000 transport allowance. Those targeted are mostly semi-skilled and non-core staff such as security personnel, telegraphics, cleaners and clerical assistants. The affected workers were handed their retrenchment letters yesterday and directed to clear with the firm. Telkom said that the services of the affected employees will cease with effect from January 31.
East African Standard