Mobile communication sector contributes more than 5% to Nairobi's GDP

Nairobi, The mobile communication sector contributed to more than five percent of the country’s Gross Domestic Product (GDP) in 2006.

Mobile Operator Celtel’s Chief Executive David Murray on Tuesday said this translated to Sh111 billion to Government coffers during the same period.

Addressing a press conference in Nairobi, Murray said it was with this in mind that he proposed the reduction of excise duty on airtime by at least five percent.

Murray said studies showed that if excise duty on airtime was halved by five percent in 2007, the likely impact in 2017 would be an increase in overall tax collection by five percent with revenue neutrality achieved after six years.

According to a study by GSM Association, increased mobile penetration of six percent would increase GDP ratings in Kenya by 1.2 percent annually.

He said local mobile calls were currently levied at a value added of tax (VAT) rate of 16 percent plus an additional excise duty of 10 percent.

He said that lowering the cost of airtime through reduced taxation would lead to more people being linked to mobile telephony as cost was the biggest barrier to potential subscribers.

“At 26 percent, the levy is among the highest in the world, locking out millions of low-income earners, especially in the rural areas and the marginalized areas,” he said.

Murray said further discussions were on going on a proposed additional one percent charge levied by the government on mobile phone companies.

“Developing countries should stop the introduction of Universal Service Fund (USF) fees for true access to telecommunications which would ultimately spur economic growth,” Murray said.

He said the cost of making mobile phone calls in Kenya today was the highest in the region and among the highest in the world thus marginalizing the poor and the rural folk.

The CEO warned that for the Government’s Vision 2030 to work, concerns raised by the telecommunication industry must be addressed. The Vision aims at transforming Kenya into a globally competitive and prosperous nation.

He cited the growth of the telecommunications industry in developed countries as responsible for 33 percent of the GDP between 1970 and 1990.

Currently, over 200,000 Kenyans are employed directly and indirectly in the mobile phone industry.

Murray’s proposal comes days before the presentation of this year’s budget on the 14th of June.

This is not the first time the sector has made the proposal.

At the same time, Murray said the mobile company will begin its blackberry Mobile Data System test drives soon.
Murray said the software has just arrived in the country and is currently undergoing testing.

He added that the system will allow subscribers wireless access to e-mails and other business applications.

Elsewhere, Celtel’s Competitor Safaricom said the new Blackberry Mobile Data System, that allows users wireless access to e-mails and other business applications would be available in the market by the end of the month.

Safaricom CEO Michael Joseph said the operator has carried out successful pilot programs for the product designed mainly for the corporate market and would roll it out as soon as the software was available.

Source : Capital FM
The device includes premium phone features such as smart dialing and conference calling.

He added that the product would initially only be available for post paid subscribers and would be accessible to pre-paid subscribers by early next year.

Joseph also said users would have to pay a connection fee to install the software on the email server and monthly access fees of Sh5, 000.

Meanwhile, Joseph said he hoped that their proposals to Finance Minister Amos Kimunya to reduce excise tax on mobile services would be considered in this year’s budget reading.