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Telkom Kenya is to cut 10000 jobs

By James Macharia, Business Day, 1 November 2000

NAIROBI - Telkom Kenya is to cut 10000 jobs in a major five-year restructuring process starting next March, according to sources close to labour.

Telkom Kenya is involved in a privatisation bid. SA telecommunications companies Telkom and MTN are among 20 international firms that prequalified to bid for a 49% stake in Telkom Kenya after the launch of the company's privatisation process in April.

In the first phase of the programme between 4000 and 5000 employees will be retrenched at an estimated cost of $26,6m. By then the state-run firm will have finalised negotiations with its new partner.

Kenya's finance minister, Chris Okemo, says the government will sell the 49% stake it holds in Telkom Kenya in its bid to create a world-class telecommunications network within Kenya and encourage greater economic activity.

The reorganisation at Telkom is just part of an overhaul by the government of its interests. This will also affect other utilities such as those in the rail and power sectors.

Telkom Kenya has been headed for sale for years. It has incurred a 266m debt since its inception in the late 1970s.

The staff cutbacks are intended to achieve a staff-to-telephone line ratio of 1:55. Currently the ratio stands at 1:14, while the firm has 19800 employees.

Sources familiar with the privatisation process say when the five consortiums bidding for the 49% shareholding carried out due diligence studies of the corporation, they indicated they would like to operate a business where the ratio of personnel to connected lines was at most 1:55 with about 9000 employees.

Telkom Kenya's CE Augustine Cheserem, however, says the company is yet to decide on the number of employees to retrench. He also insists that the ratio of one person to 55 lines "is our business plan drawn last year and not a condition from potential partners".

He says only when the company has concluded an agreement with the strategic partner will it "determine numbers to retain, skills required, functions to be outsourced and criteria for retrenchment".

For the second phase of the retrenchment to be shelved, the company will need a total of 825000 lines, an addition of 485000 lines to the current 340000 fixed lines to meet the required ratio of 1:55.

Cheserem says Telkom Kenya is to double the network in five years in accordance with the business plan, "and with the investor coming in the expansion may be much faster". This will limit layoffs.

Telkom Kenya's staff union, the Union of Postal and Telecommunications Employees, is demanding that each of the affected persons be given a golden handshake of 6666. The criteria for layoffs are yet to be determined.