Telkom’s cash troubles deepen as court awards ex-staff Sh3.2bn
A Telkom Orange customer care shop in Nairobi. Telkom Kenya financial troubles are set to mount after the Court of Appeal on Friday asked the operator to pay former workers Sh3.2 billion. Photo/FILE
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Telkom Kenya financial troubles are set to mount after the Court of Appeal on Friday asked the operator to pay former workers Sh3.2 billion.
The payout will hit the telecommunications firm hard given that recently huge losses had forced Telkom Kenya to rely on shareholder and bank loans – a mode of operation that raised its interest expenses to nearly half the revenues.
Telkom Kenya financial troubles are set to mount after the Court of Appeal on Friday asked the operator to pay former workers Sh3.2 billion.
The payout will hit the telecommunications firm hard given that recently huge losses had forced Telkom Kenya to rely on shareholder and bank loans – a mode of operation that raised its interest expenses to nearly half the revenues.
A director of the firm reckons that the operator will either turn to its shareholders for more cash or borrow from banks to meet the bill.
The 996 former workers of Telkom Kenya, who were laid off in 2006, will each be paid a golden handshake of Sh150, 000, and a severance pay equivalent to two and half months’ salary for each year worked.
This is a departure from the package provided by the firm that included a one month pay for every year remaining because the workers at above 50 years could immediately access their pensions.
The workers moved to court saying they were discriminated on the basis of age given that younger workers were paid based on the number of years they had served Telkom Kenya.
The Court of Appeal agreed with the High Court that the employees were entitled to equal and fair treatment with regard to the exit packages.
“There is no reason to upset the decision of High Court. Appeal fails and it is therefore dismissed,” ruled three-judge Bench comprising Kathurima M’inoti, Paul Kariuki and Jamila Mohamed.
The former Telkom workers’ lawyer, Anthony Oluoch, estimates that each worker will now receive between Sh900, 000 to Sh3.5 million.
But the awards are to be paid with a 14 per cent interest from the time the case was filed in 2007—pushing the total bill to Sh3.2 billion.
Telkom Kenya recently raised Sh7.6 billion from its shareholders against a target of Sh10 billion to fund its operations and settle debt owed to banks like Standard Chartered Bank and KCB.
France Telecom owns 70 per cent of the firm, which returned a net loss of Sh18 billion in 2011, and remaining share is held by the government.
The re-organisation of the firm is billed as the most expensive in corporate Kenya having consumed nearly Sh130 billion in the past seven years. The process began with an Sh85 billion clean-up of Telkom Kenya’s books in readiness for its sale to France Telecom in 2007.
