NEW PAYMENT SYSTEM INTRODUCED FOR SPECTRUM LICENCE FEES

By John Syekei Wednesday, February 20, 2019
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In Kenya, one of the greatest barriers to establishing operations as a telecommunications service provider and system operator is the stringent licensing requirements and the accompanying licence fees.

The Kenya Information and Communication Act (KICA) provides that a licence may include conditions requiring the licensee to pay such fees as the Communications Authority of Kenya (CA) may prescribe. Owing to this vague stipulation, these fees are, more often than not, on the high side and can total millions of dollars. This is a major deterrent to new market entrants and compels market players wanting to remain competitive to dig deep into their pockets to come up with the necessary funds.

Although the KICA was silent on when these fees were payable, the CA had adopted the position that all the licence fees, including the licence application fees, initial operating licence fees and access fees for frequency spectrum, were to be paid prior to the licence being issued.  The Statute Law (Miscellaneous Amendments) Act 2018 (the Amendment Act) has now encoded the CA’s practice into law. This does little to ease the burden on licence applicants, who may find it difficult to pay fees of this magnitude before they have even commenced operations.

However, on a more positive note, the Amendment Act introduces a payment system where licensees may pay spectrum licence fees in equal instalments over a period of time. To qualify, however, applicants must meet the criteria set. First, the CA must consent to such an arrangement and the payment period cannot exceed 10 years. Furthermore, the fees payable must exceed KES 1 billion (approximately US$10,000,000), the applicant must be a Kenyan citizen or an entity in which Kenyan citizens own at least 51% of the shares, and the applicant must undertake to construct at least 500 base transceiver stations across the country within three years of being granted the licence.

To control any unscrupulous exploitation of the arrangement, the new section stipulates that the licensee shall be liable to pay the fees in full if it ceases to be a Kenyan citizen or an entity with a majority Kenyan shareholding, or, if it proposes to transfer or assign the licence to a non-citizen or an entity in which Kenyan citizens do not hold the majority of the shares. Further, failure to construct the 500 base stations within the prescribed period will result in the licence being revoked.

Given that the Amendment Act was published in January 2018, it is still too early to assess the impact, if any, the amendments will have on the telecommunications industry. It is also unclear how the request by the applicants to pay their licence fees under this system will be made, but it is likely that the CA will amend the application forms to allow for this.

Though the statute does not set a maximum limit on the amount that the CA can charge for spectrum licence fees, the amendment does ease the burden placed on applicants at the outset by allowing the applicants a longer period of time in which to pay this fee.