Mobile companies complain that Telkom Kenya’s wireless service is really ‘mobile service’ for tax purposes


The reverberations of Telkom’s official launch of its wireless service last week has resurrected a growing dispute within the telecommunications industry. The war of words between telephone operators intensified this week as Celtel once again appealed for clarification on the role of the national operator, saying Telkom’s recently launched wireless service is acting in direct competition with its own.

“All we ask for is fair play,” said David Murray, Celtel’s CEO.  “Telkom Wireless is a mobile service and should be treated as such.” The launch of Telkom Wireless has brewed dissent amongst mobile telephone players who are protesting against what they term unfair business practice. Both Safaricom and Celtel have appealed to the industry regulator, the Communications Commission of Kenya (CCK), to clarify Telkom’s status.

The firms say the national fixed line operator is now acting like a mobile service provider and has not paid for a license to operate. “It is a clear contravention of the regulations.  They have a competitive advantage over us,” said Michael Joseph, Safaricom’s CEO.

Celtel has now asked that Telkom either pay for a license to offer wireless services or be charged taxes like other mobile operators. Currently, mobile operators are taxed 16 per cent VAT and 10 per cent excise while Telkom just pays VAT.  Mobile companies say they would be able to pass on lower calling costs to consumers if the taxes were lowered.

But a fierce lobbying campaign started late last year by both providers failed to induce the government to reduce or remove the excise tax in this year’s budget. The mobile players hope to meet the Minister of Finance to revisit the tax issue and to ask for definitive action to be taken on Telkom’s status.

The industry regulator has said that Telkom is merely leveraging existing technology to launch its wireless service, which it maintains is still a ‘fixed’ telephony product.

CCK’s Director-General has maintained Telkom Wireless is the natural evolution of the national operator’s fixed line service and is the result of the operator upgrading its equipment.  “CDMA will fuel the growth of this industry.  Telkom is merely upgrading its Instafon service, which was fixed line service, to the CDMA platform, which is wireless product,” said CCK’s John Waweru.

(Source: Business Daily)