New taxes to hit smartphone adoption

New excise taxes on imported cellular devices/mobile phones are expected to hit the adoption of 4G devices or smartphones as the cost of devices soars.

Telecom operators expect the introduction of the 10 per cent excise duty on the phone imports to impact digital inclusion should some Kenyans struggle to afford devices.

More so, the higher taxes are seen slowing down the upgrade of devices even as most Kenyans seek to switch from 2G to 3G devices and from 3G to 5G devices.

“Any increase in prices does impact adoption percentages. Everything is getting costlier in the market and it is a concern as disposable income come under pressure. We however still have to wait and watch,” stated Airtel Networks Kenya Managing Director Ashish Malhotra.

According to data from the Comminication Authority of Kenya (CA), the number of smartphone and feature phones connected to mobile networks stood at 26.5 million and 33.6 million respectively at the end of March.

This to tally the penetration rate of feature phones and smartphones at 69.2 and 54.6 per cent respectively.

The increased importance of mobile data among customers is however expected to offset the hit in the pricing of devices as Kenyans preference for faster internet connectivity persists.

“Using data has become part of life for Kenyans. People are upgrading from 2G to 3G and from 3G to 4G handsets. That will continue to happen. What we might see change is the pace of adoption,” added Mr. Malhotra.

The adoption of 5G devices might nevertheless see the biggest impact with the prices of 5G smartphones already sitting well above the reach of many Kenyans.

Earlier this year, leading telco Safaricom indicated costly 5G mobile phones had slowed down the expansion of its 5G network which the company says is reliant on the mass adoption of 5G handsets.

On Thursday, Safaricom indicated its would raise phone prices to reflect the introduction of the 10 per cent excise tax and the 25 per cent import duty on phones as part of the East African Community Common External Tariff (CET).

The cost of SIM cards has also been impact by taxes following the introduction of a Ksh.50 excise duty for each imported SIM card.

This has seen Safaricom double the price of SIM cards to Ksh.100.

The higher cost of SIM cards may cut active mobile subscriptios even as the SIM penetration rate stands at 131.4 per cent.

Data from the CA shows the subscriptions stood at 64.9 million at the end of March, falling slightly from 65.1 million in December 2021 from deactivations related to the ongoing SIM registration exercise.