Kenya Telkom's new MD Sammy Kirui promises explosive growth and action on revenue leakage
According to the widely leaked recent report from PKF Consulting on Kenya Telkom, it has 3052 watchmen, messengers and porters amongst its total payroll of 17,480. The Senegalese incumbent Sonatel, with the same number of fixed line customers as Telkom Kenya, had only 2,000 employees. PKF Consulting has recommended that 12,281 of these employees should be laid off. On this basis, Telkom would still have double the employees it needs. The cost of making 12,281 employees redundant? According to the consultants it will cost somewhere between USD74-232.5 million. With pension costs included the figure rises to between USD146.8-304 million.
The Permanent Secretary of the Information and Communications Ministry said last week:"We wish this (staff redundancies) could be done as quickly as possible because the corporation's revenue is on a downward trend...Telkom has too many workers. This makes it unprofitable. After some time, it will collapse completely and everyone will go home." The Government has very few places where money on this scale can be found. One would be to sell its shares in Safaricom to Vodafone, a deal that has been under discussion for months but which the Government seems unable or unwilling to conclude.
Telkom Kenya's last Managing Director John Waweru made clear at an early point after his appointment that large scale redundancies were essential but the current Government has seemed until this point to have lacked the will to take the difficult decisions needed to make it happen.
Despite this unhappy history, its new Managing Director Sammy Kirui is an an upbeat mood, telling the world that "the company is about to explode (with new growth)". In an interview last week with News Update last week he praised the work already undertaken by his predecessor and identified the scale of the problems he will need to get to grips with.
What were your first impressions of the company on joining?
It’s not new to me. I had a lot of interest in it as the regulator and as it was also monopoly incumbent I looked at it very keenly. Its problems – like dissatisfaction with its services – were constantly being brought to our attention. So its problems are not new to me.
How would you summarise its main problems?
There are issues of staffing. Morale has been low because of the forthcoming staff rationalisation.
There are network issues. We’re running a network that’s fairly old. The switches are from different manufacturers with different management systems. If there’s a fault, we don’t know exactly where the problem is. We want to be able to trouble-shoot effectively.
We have customers at all levels who are very dissatisfied. There’s demands from users that we are not able to meet. This is either due to bureaucracy or the procurement systems.
We have to look at our declining revenues and market share. We have to identify where there is revenue leakage. There are inefficiencies in the company. The company is not computerised or automated and this allows the potential for fraud.
There are issues of vandalism which is quite rampant and costs us KS400m a year. Some of the lines vandalised are the fibre optic cables and when they go down, large numbers of people are without service. This is not just a Telkom Kenya issue but has a direct impact on the Kenyan economy.
When will the staff rationalisation happen?
The consultants report is just in and it now has to go to Government. We just need the go-ahead from Government. Then the question is: how will we fund it?
The staff rationalisation has been talked about for several years but never seems to happen. Is there the political will?
The Government has the will to do it. An inefficient Telkom Kenya impacts on the economy. You can’t go out and sell Kenya as a destination for overseas investment without an effective communications infrastructure.
What about the company’s revenue leakage problems? Can you get to grips with them?
We have a pretty good idea of what is going on and can therefore do something about it.
How serious is the financial situation of the company?
It’s breaking even but not making a profit.
When will the privatisation happen?
It depends on the Government. It has to decide. The company has inherited a number of legacy from when it was linked to the Post Office. Things like tax and pension liabilities have to be sorted out. We also need to invest in the network to create a company that has value.
How long will it be before the Kenyan on the street will see improvements in service?
As soon as the staff rationalisation is carried out. Once it is completed, we will have the money to invest in the network. Next week we will start building the Nairobi to Mombasa fibre link and it will be completed by December this year. We are currently testing our new VoIP service and it will either be launched this month or next month.
We are proceeding with the ADSL launch. We are projecting that there will be 6000 subscribers. We are currently working on pricing issues. We have a good working relationship with the ISPs and will partner with them. We have not yet firmed up how this relationship will be structured.
Our network will be 100% digital by the end of the year and we are about to extend our IN network platform for pre-paid calling cards.
Will you have your own ISP?
We are currently finalising the plans for our own ISP. But I have been very clear there will be no special preference for our own ISP. It has to survive or perish (as a business in its own right).
What are your network expansion plans?
We have to sort out our problems with the switches. We have to get them under one management system. When we achieve this, it will boost quality.
We will address issues of broadband provision as part of the ADSL launch. We are also planning to do broadband wireless and are looking at a number of different solutions.
In terms of fibre infrastructure, we are exploring where we can co-operate with Kenya Power and Lighting and seeing what synergies we can achieve.
Have you got enough money to invest in the EASSy fibre project?
We will be making a self-financed investment in the project.
What’s Jambonet’s market share now that there is competition?
It has retained a share of the market.
Overall, the situation at Telkom Kenya is not as bad as it is portrayed in the newspapers. Potentially we have a very exciting company with growth potential.
How will you address the issue of confidence in the company from your customers?
We will have to work very hard to get the confidence of Kenyans. And the only way we can achieve that is to get network up-time 24/7. We have to invest in management systems. We have to invest in people through training them. We need to work towards being able to sign service level agreements. We have to automate our processes so that it does not take 6 months to get a line. People need to be able to have faith in our billing systems.
There’s a paradox in terms of the staffing situation: Telkom is over-staffed but we are short of technical skills. We are over-staffed at the admin level. There’s also quite a lot of layers of management and we’ll be looking at that. We’re currently top-heavy.
What will happen in terms of pricing?
We are looking at some of our interconnect agreements. We’re currently seeking to renegotiate with Safaricom and in due course will do the same with Celtel. We’re trying to get the rates down. We’re also trying to deal with the grey market. The grey market affects my revenue because I have to pay the interconnect for calls I’m not getting revenue for. We should be able to drive international prices down.
Will you be using CDMA more extensively?
We will use it to invest in rural areas because it is cheaper to deploy than copper. It will also help where there is a lot of vandalism.