Telkom Kenya offers retrenchees Sh1.8bn to end court dispute

Former Telkom Kenya employees in court for the hearing of their compensation case against the company in July 2013. PHOTO | FILE
Former Telkom Kenya employees in court for the hearing of their compensation case against the company in July 2013. PHOTO | FILE 

Telkom Kenya has agreed to settle retrenchment dues at the centre of legal disputes with former employees that have been in court for nearly 10 years.

France Telecoms, the majority owner of the company, has agreed to pay the nearly 2,000 former employees Sh1.8 billion ahead of the planned sale of its 70 per cent stake to Helios Investment Partners.

Telkom Kenya management told the Business Daily that the amount was agreed in an out-of-court settlement and captures all the three cases in court.

The settlement brings to an end the legal battles between Telkom Kenya — 70 per cent owned by France Telecoms and 30 per cent owned by the Government of Kenya — and the former employees.

Victor Kyalo, the principal secretary (PS) in the Ministry of Information and Communication, said the settlement was made to meet the pre-conditions Helios had set for its purchase of France Telecom’s stake.

“We have the money and some of the employees have been paid. The company got a shareholders loan, which is partly being used to make the payments,” the PS said, adding that the government did not participate in the latest round of shareholders loan.

Mr Kyalo’s revelation effectively means the Treasury, which holds the government’s stake in the firm, may have ceded additional shares in Telkom Kenya, leaving the public with less than 30 per cent interest.

Telkom Kenya said the Sh1.8 billion settlement covers the three cases, leaving the company without employee claims ahead of the planned share sale.

The Business Daily could not confirm whether the Sh1.8 billion is inclusive of the legal fees payable to the law firms that negotiated the settlement.

Each of the 2,000 ex-employees would get an average of Sh900,000 without legal fees or less with the legal fees.

The settlement of the three cases leaves only two known hurdles on France Telecoms’ exit path — reaching an agreement with the Communications Authority of Kenya (CA) on the payment of the Sh1.5 billion frequency and operations fees and payment of the Sh639 million debt that rival Safaricom is claiming.

“All matters that were pending at the Employment and Labour Relations Court, the Court of Appeal and the Supreme Court have been amicably resolved by way of consent judgment,” says the legal brief seen by the Business Daily.

“The company’s legal team and that of the plaintiffs arrived at an agreement on the final payout deal for the ex-employees that were represented in the suits, thereby bringing the cases to a close.”

Telkom Kenya further says in the brief that the settlement will not be subject to statutory taxation, a relief that arises from a tax waiver granted to the plaintiffs through Legal Notice Number 95 of June 23, 2006.

France Telecoms on November 9, 2015 announced that it had signed a binding agreement with Helios to acquire the entire 70 per cent stake it held in Telkom Kenya.
This sparked demand notes from both the CA and Safaricom seeking payment of outstanding debts.

Francis Wangusi, the CA director-general, said Telkom needed to pay the Sh1.5 billion debt to get the planned sale approved. Mr Wangusi said the debt comprises accrued frequency and operating fees for 2014 and 2015.

Safaricom has sought a court injunction blocking the sale of France Telecom’s 70 per cent stake in Telkom Kenya until the Sh639 million debt is paid.

Safaricom, through its advocate Kiptinness and Odhiambo Associates, moved to court saying it stood to suffer irreparable loss and damages if the sale and takeover of France Telecoms’ stake in the Kenyan company is concluded before the debt is paid.

The suit is due for hearing on Monday.

The Helios buyout is expected to bring to an end France Telecoms’ long search for an investor to take over its interests in the Telkom Kenya, which has lost billions of shillings despite several capital injections and debt write-offs over a period of eight years.

The dispute between Telkom Kenya and John Ochanda and others — said to be 996 former employees retrenched between May 31 and June 2006 — arose from the manner in which the telecoms operator executed its staff rationalisation programme.

The plan, which was executed in two phases, initially affected those aged over 50 years before moving on to those aged below 50.

Those retired in phase one got three months basic salary in lieu of notice, a severance payment of one month for every year remaining and a Sh40,000 transport allowance.

The phase two retrenchees, however, got a package of two months basic salary in lieu of notice, a severance payment of two-and-a-half months basic salary for every year worked, a golden handshake of Sh150,000 and a transport allowance of Sh40,000.

The cases mainly involved employees retired in phase two of the programme.

This is because severance and golden handshake payments were made to employees aged more than 50 years but those aged below did not get their dues.

This differential treatment precipitated a suit at the High Court, with the ex-employees claiming that Telkom Kenya had acted in an unlawful, discriminatory manner in paying different packages to its members of staff in the two phases.

The ex-employees further claimed that they were not paid some allowances due to them, such as those pertaining to medical and housing. 

They also complained that Telkom Kenya had failed to observe a government gazette notice issued on June 23, 2006, which exempted the retrenchees’ lump sum payments from tax.