News Column

Online public services drive bid for lower phone prices

June 29, 2014


Two Cabinet secretaries have started talks aimed at bringing the cost of smartphones down and spurring the uptake of public services that will increasingly be delivered online.

ICT secretary Fred Matiang'i said he was negotiating with his Treasury counterpart, Henry Rotich, on measures that would substantially reduce the cost of handsets, accelerating mobile phone penetration in lower income segments and rural areas.

"As we move to the future, more people will be accessing information through their handsets than personal computers. This may not be possible for all as the prices of smartphones are out of reach of many," Dr Matiang'i said.

He did not disclose the options that were under consideration, but added that a study had been agreed upon to inform measures for reducing the cost of handsets with effect from July next year.


"As a government, we are going to do a study that will inform our decision to bring down the costs. This can only happen in the next financial year," Dr Matiang'i told the Business Daily.

The government's fiscal year runs from July but the budget for the cycle that starts tomorrow has already been done, meaning the earliest subscribers can enjoy cheaper smartphones is July 2015.

The government aims to deepen mobile penetration from 75.8 per cent to 90 per cent by 2018, enabling it deliver services online to cut down on paper, hands and to curb corruption. Dr Matiang'i said more affordable handsets would enable end users utilise the broadband capacity that has been installed by telephone companies.

"A strong ICT infrastructure is of no use if people cannot access it. That is why we are also asking the handset manufacturers to bring down their prices as they await the government's decision," he added. 

READ: Open government data portal closed for most Kenyans

Previous attempts by mobile operators to subsidise high-end handsets have not been fruitful. Telkom Kenya's Orange bid to offer network specific iPhones at below market prices in anticipation of income from data bundles flopped after rogue technicians unlocked the handsets for use in rival networks.

READ: Telkom Kenya launches Apple iPhone 4

In the 2012/2013 financial year, the government reintroduced the 16 per cent Value Added Tax on electronic equipment, including mobile handsets.

In January Bruce Howe, the outgoing general manager of Microsoft Mobile Devices ( formerly Nokia), said that the company's sales had dropped by 20 per cent in the three months to December following the imposition of VAT on handsets, saying consumers had turned to cheaper counterfeit phones.

"We have witnessed a drop of our sales in handsets by 20 per cent between September and December, coming shortly after the introduction of VAT in a period where imports of grey phones has increased," Mr Howe said in a past interview.

Mobile penetration in Kenya jumped from 45 per cent in 2009 to 75.8 per cent in December 2013, according to data from the Communications Authority of Kenya (CA), formerly CCK.

The Anti-Counterfeit Authority says Kenya loses nearly Sh3.2 billion annually through tax evasion and sale of counterfeit phones, a thriving trade in downtown Nairobi and other major urban centres. Mobile phone operators switched off fake phones in 2012 following a directive from CA, but rogue technicians unblocked the fake phones for a fee.

There are only 4.5 million smartphone handsets and tablets connected to the four mobile providers - Safaricom, Airtel, Orange and yuMobile - against a subscriber base of 31.3 million.

This means that most mobile subscribers have basic phones that cannot access faster internet services such as 3G, leaving mobile phone companies with unutilised capacity. In the financial year ended March, Safaricom reported the number of 3G devices on its network at 3.1 million out of which 1.9 million were smartphones.

The prices of smartphones range from Sh7,000 for the most basic one to Sh85,000. This has made smartphones a preserve of the middle class, which has doubled in the last decade to 6.5 million people, almost a fifth of the population, according to the African Development Bank.

The bank defines persons with an annual income exceeding Sh340,000 per year and spending between Sh500 and Sh900 ($6 and $10) daily as being in the middle class.

For more stories covering the world of technology, please see HispanicBusiness' Tech Channel

Source: Business Daily (Kenya)

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