Electronics wholesalers and telcos will be hit with new regulatory fees that the Communications Authority of Kenya (CA) says are part of a broader plan to stem the influx of counterfeit devices.
The CA has proposed a Telecommunication Equipment Distributor (TED) licence, which will see wholesalers and telcos part with a one-off Sh250,000 for 15 years and annual operating fees calculated as 0.4 percent of their yearly turnover but not less than Sh120,000.
The operating fees could hit millions for big telcos like Safaricom, which rake in billions of shillings from gadget sales such as mobile phones.
The charges under the TED licence are new with the CA saying that the proposal is key to ensuring that all electronic devices such as mobile phones, television sets, laptops and tablets in the country meet all international and local quality standards.
"Arising from the introduction of the TED licence, vendors will be required to obtain their goods from ICT equipment importers who will now bear the responsibility of ensuring that all communication devices they import or manufacture comply with established industry standards in Kenya," the regulator says in the proposal.
The CA says there is an influx of counterfeit electronics that lack the International Mobile Equipment Identity (IMEI) making it hard to track stolen gadgets or secure devices.
The counterfeits also deny the government revenue in the form of tax evasion. Big wholesalers and telcos that make billions of shillings from the sale of electronic devices such as mobile phones, tablets, laptops and television sets face steep fees in the annual operating charges for the TED licence.
Safaricom recorded revenues of Sh10.54 billion from the sale of mobile phones and other devices in the year that ended March 2024, meaning that the telco could potentially pay Sh42 million as the annual operating fees for the TED licence.
The licence will be valid for 15 years and will compel the wholesalers and telcos to ensure that they attach a warranty period of at least one year on all their gadgets.
It also remains to be seen if the adoption of the new licence will trigger a rise in electronic prices, as the dealers and telcos pass the increased cost to consumers.
Buyers bore the brunt of a spike in electronic prices in the last two years as a weak shilling led to a rise in prices given that nearly all devices in Kenya are imported.
The telcos are competing with wholesale dealers tapped by global firms such as Samsung and Telephone Communication Limited (TCL) to locally sell their gadgets such as television sets, mobile phones, laptops and tablets.
The CA estimated the number of counterfeit mobile phones at more than 3.5 million four years ago, adding that the sale of fake gadgets cost the economy Sh3.2 billion annually via tax evasion.
However, the effectiveness of the TED licence remains to be seen given the demand for smartphones, television sets, tablets and laptops. The gadgets are a necessity for most Kenyans, mainly for learning and working purposes.
There were 35.21 million smartphones in Kenya in June 2024, up from 26.5 million in March 2022, according to the CA data.
There are no latest numbers on the ownership of television sets, tablets and computers. However, improved livelihoods and increased technological penetration, both for work and studies have spurred more Kenyan homes to own the devices.
The CA argues that the proposal is an easier way to combat the influx of counterfeit electronics, given the high number of vendors selling the devices.
"Further, the large number of vendors makes it nearly impossible to control the sale of substandard devices in the market," says the regulator in the report dubbed Review of the Telecommunications Market Structure, 2024.
The proposal marks the third time the CA has tried to arrest the proliferation of counterfeit electronics in the Kenyan market.
In 2023, the Supreme Court allowed the regulator to install a device on mobile networks to detect counterfeits.
Safaricom has sought to thwart CA's push to roll out the Device Management System (DMS), arguing it would offer the State a window to snoop on confidential data such as calls, texts and financial transactions.
It remains unclear why the CA has yet to roll out DMS nearly two years after apex court clearance. The regulator first mulled the introduction of DMS in 2020.
Early last year, the CA invited firms to bid for a tender to develop an online platform on which Kenyans would key in their phone IMEIs to confirm if they are genuine.
Successful implementation of the platform will be a continuation of the 1555 IMEI verification project, which lapsed in March 2023, marking the end of a three-year window that allows users to verify the authenticity of their devices.
