Phone calls within East Africa to cost more

Saturday October 19 2013

Making a phone call. Taxes introduced by four East African Community member countries have increased call charges. Photo/FILE

The cost of calling across the East African region could rise sharply if Kenyan telcos increase their charges in response to taxes being levied by countries in the region.

Kenya telecommunications operators said the new taxes on international calls imposed by Uganda, Tanzania, Rwanda and Burundi had made it more expensive for Kenyans to call those countries.

This could see them respond by levying similar charges on calls generated from the four countries as well as encourage international operators to transfer their calls through routes (bulk carriers) that would be hard for governments to monitor, potentially denying them millions of dollars in tax.

Mobile phone service provider Safaricom, in a protest letter to the Cabinet Secretary for East African Affairs, Commerce and Tourism Phyllis Kandie, said the new taxes, averaging $0.12 per minute, were a non-tariff barrier that would slow trade in the East African Community.

The tax means that Kenyans will contribute about $26 million in direct taxes to the four countries every year through calling.

The letter, dated October 16 and written by Bob Collymore, the Safaricom chief executive officer, shows that Burundi charges the highest tax for calls coming from Kenya at $0.16. Tanzania charges $0.12, Uganda $0.09 and Rwanda $0.10.


“A direct consequence of these taxes is that Kenyan telecommunications operators will have no choice but to pass on the proportionate increase to Kenyan consumers,” said Mr Collymore in the letter copied to chief executive officers at rivals Mickael Ghossein (Telkom Kenya), Shivan Bhargava (Airtel Kenya) and Madhur Taneja (Essar Telecom Kenya).

“As a result, the retail costs of international direct dialling to Uganda, Tanzania, Rwanda and Burundi will increase. In addition, the cost of roaming, for subscribers who prefer to use their existing numbers when travelling in East Africa, will also increase,” said Mr Collymore.

Data shows Kenya exports approximately 18 million minutes every month to East Africa, meaning the country will be contributing approximately $2.16 million every month to the governments of Uganda, Tanzania, Rwanda and Burundi in taxes for international calls.

The Kenya operators want the governments of Uganda, Tanzania, Rwanda and Burundi to exclude application of these taxes in the EAC.

READ: Uganda’s new tax will raise calling rates, hurt integration

Players said the taxes will shift a significant number of international minutes destined for the four EAC countries to SIM gateways operators who do not pay taxes and cannot guarantee call quality.

International calls, analysts said, have emerged as big contributors to the revenues of most telecom firms in the region as more people participate in cross-border trade.

“The matter has moved from being an entirely telecommunications issue to an international trade concern and specifically with regard to trade within the East African Community,” said Mr Collymore in the letter.

As a result, the Consumer Federation of Kenya (Cofek) wants taxation on telecommunications to be controlled through a regional law to protect businesses and consumers from arbitrary tax increases.

“Tax measures regarding telecommunications should be agreed collectively and supported through regional legislation,” said Stephen Mutoro, the secretary general of Cofek.

The telecommunications licensees in Uganda, Tanzania, Rwanda and Burundi are expected to collect the taxes received from incoming international calls and deliver them to their governments.