Treasury pushes Telkom Kenya to cut jobs, foreign executives

The Treasury is pushing Telkom Kenya to shed jobs and reduce expatriate staff as part of a wider plan to return the operator into profitability.

Also read: State turns its Telkom Kenya loan into equity

Finance minister Njeru Githae said on Friday that Telkom Kenya’s staff count does not match its revenues and the operator should restructure its employee base to be in line with the industry average.

He also asked the company to reduce the count of staff seconded from France Telecom, which owns 51 per cent of Telkom Kenya, arguing that the lack of knowledge of the local market of the local market by the foreigner workers is partly behind its losses and falling market share.

The Treasury says the reorganisation of Telkom Kenya’s executive suite and cut in payroll costs will be conditions attached to new funding estimated at Sh2.5 billion that the government will inject in the telecom firm.

Already, the government and France Telecom—which has majority stake in Telkom Kenya—have agreed to write off and convert part of the Sh34 billion shareholder loan they advanced the operator.

“Their labour force is bloated and if you compare the turnover at both Safaricom and Telkom Kenya with their respective employee count, you will see that not much can be achieved with Telkom’s employee numbers,” said Mr Githae.

“We need to change the business orientation instead of all top offices being held by people from France who haven’t understood the local business environment.”

Presently, France Telkom has a bigger influence in Telkom Kenya relative to the government based on its huge presence in the firm’s executive suite and more seats in the boardroom.

The positions of CEO, chief financial officer and heads of marketing as well as technical divisions are occupied by managers seconded from the French firm.

The Kenyan government has repeatedly demanded that its French partner fill either the position of managing director or finance director and leave the other to a Kenyan to balance decision making at the firm.

But the French firm recently expressed its confidence in Telkom Kenya’s executive team when it left the Kenyan unit unchanged in the September shake-up management across its African and Middle East operations in Madagascar, Mali, Tunisia, Mauritius, Senegal, Niger and Jordan.

But its Kenyan unit has sunk deeper into losses in what has made it rely on shareholder loans to sustain its operations.

Telkom Kenya in 2011 made Sh9.2 billion in revenues and a Sh18 billion net loss.

The management is blaming the price war, which saw tariffs in the mobile telephony market drop by half in 2010, for its woes.

The French had in 2008 hoped to return Telkom Kenya to profitability in 2011, but this was scuttled by the decision by the regulator, the Communications Commission of Kenya to cut the mobile tariff rate (MTR) that operators charge each other for interconnecting customers through networks by half to Sh2.21 on July 1, 2010.

At the time, mobile networks were charging customers a minimum of Sh8 per minute, but this has since dropped to an average of Sh4.

But the Treasury, which is the custodian of the government’s investment in the telecoms firm, blames weak management, and a strategy that has failed to live up to the radically shifting environment in the Kenyan telecommunication scene.

“Telkom should employ Kenyans who understand the dynamics of the local market. They can keep the position of chief executive, but I do not understand why somebody like the marketing manager should be a foreigner,” Mr Githae said.

Now, the government is asking Telkom Kenya to strive for lean operations to stabilise the business as it works on a long- term strategy to grow revenues.

Mickael Ghossein, the CEO of Telkom Kenya, refused to comment, arguing that it was a shareholders’ matter.

Last year, Telkom Kenya shed 400 jobs and has sent home about 15,500 workers in the past five years.

The ambitious turnaround plan began in the run-up to the 2007 sale of a 51 per cent stake to France Telecom for Sh27 billion.

The Communications Commission of Kenya (CCK) March report indicates that the company trails in the voice market commanding only 0.8 per cent of the voice traffic while Safaricom has 80.9 per cent, Airtel 10.9 per cent while Essar has 7.7 per cent.
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