Telkom to lay off 600 ahead of Orange’s sale of stake to Helios

Hundreds of Telkom Kenya employees could lose their jobs before year end as the majority owner, France Telecom clears the house ahead of the planned sale of its entire stake to private equity firm Helios.

The job cuts will be the subject of a board meeting Wednesday morning — the second in as many weeks — where a final decision on the extent and timelines for the retrenchment will be made.

The latest meeting comes a week after Telkom Kenya announced that it had inked a deal that will see Helios acquire the entire 70 per cent stake it owns in the Kenyan firm. The Treasury owns a 30 per cent stake and will remain a shareholder in the company after France Telekom’s exit.

Telkom Kenya intended to lay off staff earlier but slammed the brakes on the plan because it lacked the cash to pay the affected employees. The plan, however, got impetus after Telkom inked the deal with Helios who are said to be keen on its conclusion before the possible takeover.

A senior Telkom Kenya executive described the retrenchment plan as a done deal that was only awaiting the board’s approval of the number and severance packages.

“The issue of retrenchment has been there. The current shareholders [France Telecom and Government of Kenya] are negotiating how to share the costs,” said our source, adding that the plan is to conclude it before Helios comes on board.

Telkom Kenya’s current staff count of 1,623 is a drop from the 6,816 it had in December 2007 when France Telecom bought a 51 per cent stake in the firm for Sh26 billion.

Out of the 1,623 employees, about 400 are support staff, 188 are classified as commercial staff, while the remainder are technical staff.

The employees cost the company more than Sh1.2 billion annually, according to data that the company provided last year.

The company said the ratio of employee salaries to total revenues, which stood at 22 per cent last year, was seven percentage points higher than the market ideal, making it imperative to reduce the numbers to about 1,000.

France Telecom’s press officer Tom Wright declined to comment on the retrenchment plan.

Analysts at Standard Investment Bank (SIB) said Helios could use Telkom’s existing infrastructure to focus on wholesale and Internet business as well as share its towers.

“We do not think it will be a major disruptive force in the industry but will aim to turn around the company to profitability,” SIB said. “It could also target mobile virtual network operators (MVNOs) looking to launch in the Kenyan market.”

By Okutta Mark- BD