The planned merger between Airtel and Telkom Kenya is taking shape with Telkom announcing a plan to send home most of its employees to accommodate new structures. Over 500 people will be jobless after Telkom Kenya issued a 30-days notice to relevant authorities and the Ministry of Labour informing them of their plan to lay off employees in a new business strategy. Telkom Kenya has 800 employees and 575 are being laid off, meaning only 225 (25%) will retain their jobs.
In a redundancy notice sent to staff yesterday, the firm’s chief executive Mugo Kabati issued the consultative period between the business and staff, for any suggestions, ideas, and queries. The company said the move is aimed at achieving efficiency in its operations by matching its cost needs with its workforce.
Telkom Kenya will discontinue the transferred business and must terminate the employees that are currently deployed to serve in these functions as a consequence of the transaction. Other employees who provide administrative and or support services are also likely to be impacted,’’ the notice reads.
However, those employees whose lines of business have not been affected will be retained in a “redefine Telkom organization.” The Joint Venture Company might consider offering employment to some sacked employees “subject to positions being available in the new organization and those individuals meeting the recruitment criteria,” said Kibati.
The announcement comes just two weeks after the Communications Authority of Kenya (CAK) said it will approve the merger which will give rise to a new operator, Airtel-Telkom.
The regulator gave many parties opposed to the merger a month to present any objections.
Back in February this year, Airtel Kenya and Telkom Kenya announced that they had signed a binding agreement to merge their mobile, enterprise, and carrier services to form a single joint venture company to be named Airtel-Telkom.
Under the deal, the firms said in a statement, Telkom Kenya’s real estate portfolio and specific government services will not form part of the combined entity.
“The final shareholding will be determined at the closing of the transaction. Telkom Kenya has the option of holding up to 49 percent of that shareholding,” they said.
In the announcement, the merged company was be chaired by Telkom Kenya chief executive Mugo Kibati while Airtel Kenya chief executive Prasanta Sarma, was to be appointed chief executive officer, they added.
Now that their talks seem to be complete, Airtel Kenya is swallowing Telkom Kenya in an arrangement that London-based Helios Investment Partners banks on to fatten the investment for a profit before exit.
In their plan to take on Safaricom, the telecoms market leader, Telkom Kenya would become a minority partner with a 32 percent stake in the merger with Airtel Kenya.
Airtel says the two operators’ shareholding was arrived at based on the revenue contributed by the individual companies in the past 12 months prior to the closing of the deal.
The latest data shows Safaricom has a market share of 62.4 percent in mobile subscriptions. Airtel comes in second with a 26.1 percent market share, while Telkom Kenya has 7.9 percent. Combined, the two will have 17.4 million subscribers, which is still lower than Safaricom’s 31.8 million.
But this will take a lot of hard work to beat Safaricom and its mobile money product, M-Pesa which has a grip on the market and is still the most innovative firm in the telecom industry. The new entity will also need to invest heavily on marketing and quality of service if they are to dislodge Safaricom from the top spot.
In March, the Public Investment Committee raised a red flag on the proposed merger, claiming that there are outstanding issues in the deal that should be addressed before it is given the seal of approval.
The Parliamentary committee claimed the deal has all the hallmarks of a scandal where private individuals are buying off a public entity through the backdoor for a song.
Currently, Telkom Kenya is majority-owned by private equity firm Helios Investment Partners (60 percent) while the Government of Kenya holds the remaining 40 percent stake.