Kenya: Safaricom Wants Sh1.4 Billion 3G Refund Paid for 3G Licence

Mergers, Acquisitions and Financial Results

Safaricom, the leading mobile operator in Kenya, is seeking Sh1.4 billion refund from the government as part of a fee it paid in 2007 to acquire a high speed mobile phone service licence.

Intent on acquiring a 3G licence, Safaricom paid to the Communications Commission of Kenya (CCK), $25 million, (about Sh2.3 billion), being the fee set as the going industry price for the frequencies. (Read: All must pay for 3G, Safaricom insists)

It then rolled out the 3G services in October 2007, having paid for the licence in February 2007. The other operators did not pay, leaving Safaricom as the only operator to act on the offer.

In July and November last year, CCK, the industry regulator, issued Zain Kenya (now Airtel Kenya) and Telkom Kenya the same licence, but at a 60 per cent reduced fee of $10 million (about Sh930 million).

It is this difference of $15 million (1.4 billion) that Safaricom now wants the High Court to compel CCK to refund to level the playing field.

In the documents filed in court, Safaricom says the huge disparity between the licence fee it paid and that paid by its competitors creates unfair competition.

It adds that its competitors are able to price their services at a lower rate because the rates are dependent on capital investments.

The effects of this disparity, it says, is that it creates an unfair and unjustifiable tilt in the playing field in favour of other service operators, making Safaricom to operate at significantly higher costs.

The company has faulted the decision, saying it was a clear demonstration that there was a major flaw by CCK in determination of fees payable for the licence.

"The price had been set at an inordinately high level and, contrary to the clear stipulations of the CCK regulations," Safaricom says.

CCK has 14 days to respond to the case, after which a hearing date will be set.