Telkom Kenya restructuring begins as 6,500 workers are sent home

The much expected restructuring of Telkom Kenya began last week as the state-owned company retrenched 6,500 workers.

Under the retrenchment programme, the workers would be paid a two months salary, a severance pay equal to two and half months salary, plus Kshs 150,000 and Kshs 40,000 transport allowance.

Mostly semi-skilled and non-core staff such as security personnel, telegraphists, cleaners and clerical assistants are targeted under the programme. According to the letters handed out, the affected employees ceased being Telkom staff with effect from January 31, 2006.

The layoff follows a similar exercise carried out in May last year when 3,000 employees aged 50 and above were retired.

Amidst the expected competition for fixed line telephone services from the proposed second national operator, the government aims to restructure Telkom into a leaner more competitive company before privatizing it.

Last week retrenchment kicked off after a consortium of eight banks advanced Telkom Ksh 5.8 billion to roll out the second phase of the programme. The banks are Barclays Bank, Standard Chartered, South Africa's Standard Bank and Kenya Commercial bank (KCB). Others are NIC Bank, CFC Bank, Commercial bank of Africa (CBA) and East African Development Bank (EADB).

Amidst fears that it needs an additional Kshs 8.4 billion to finance its pension scheme, the state corporation has pledged as security some of its shares in its subsidiary mobile telephone service provider, Safaricom and it is expected to repay the loan after one year.

Safaricom is a joint venture between Telkom, 60 per cent, and Britain's Vodafone Plc, 35 per cent. The UK giant agreed to waive preemptive rights in Safaricom to allow Telkom Kenya borrow from banks. The Government is expected to float 25-26 per cent Safaricom shares through an initial public offer (IPO) later in the year to repay the loans.

Initially, it was expected that the retrenchment would be financed by the government's sale of 9 per cent shares in Safaricom to Vodafone. However the negotiations between the pair failed.