Kenya Telkom's plans to make 12,000 of its employees redundant may have suffered a setback because the Kenya Government has failed to find the amount of money it was looking for from its sale of its 11% stake in Safaricom. Vodafone's bid of USD100 for the stake appears to have been turned down last week. The decision on the bid gas been delayed for well over six months, presumably to allow time for the redundancy package to be costed. The Government will need somewhere between USD146.8-304m to fund the whole package including pension costs.

Managing Director Sammy Kirui last week described the retrenchment programme as sensitive, saying the Board of Directors had resolved put the plans on hold. Kirui, who was addressing Telkom staff in Mombasa, said the programme must get Cabinet approval before implementation.

Kirui said the company had not decided on the number of workers to be retrenched because there were contentious issues between the consultant and the management. He, however, said retrenchment was necessary to return the firm to return to profitability.

Meanwhile, Kirui said Telkom was in a major financial crisis. He said the staff pension scheme was under-funded to the tune of Sh8 billion because of low sale of new telephone lines, old equipment, lack of morale among workers and theft."Telkom still enjoys monopoly and has the potential to make profits. All we need is to upgrade our network and have a motivated workforce," Kirui said. He urged workers to ensure telephone lines are in working condition and customers are not charged inflated bills. This, he said, would enable the firm regain its market share that is being eaten into by alternative service providers.

Whether or not the Government will sell the stake is completely unclear. Information and Communications Minister Raphael Tuju told Parliament: "The offer from Vodafone is (for an) 11 per cent shareholding in

Safaricom, which would have given Vodafone a 51 per cent shareholding

which effectively gives them the majority shareholding. The answer is we are not selling the shares."

Meanwhile Permanent Secretary for Information and Communications James Rege told a cocktail party hosted by Safaricom:""The Government is indeed considering the viability of this

Transaction." If the Government fails to sell the Safaricom stake, it will have no strategy whatsoever for funding the redundancy package and Telkom Kenya will have taken one step closer to bankruptcy.