Tanzania mobile phone users to pay more

Mobile phone users now have to dig deeper into their pockets to make calls in Tanzania. This follows the mobile phone service providers adjustment of their airtime charges following an increase in Excise Duty on mobile services in the 2008/9 National Budget. The new rates became effective on July 1 which is the official implementation day of the new fiscal amendments approved by Parliament in Dodoma recently. All the major companies have confirmed that, the subscribers would now talk less for the same amount they used to pay before the three per cent increase in duty. Excise Duty on airtime was raised from seven to 10 per cent in the Budget read in June by the minister for Finance and Economic Affairs, Mr Mustafa Mkulo. Vodacom charges about Sh260 a minute for pre-paid Vodacom to Vodacom call during peak time and Sh225 a minute in off-peak hours. These translates into Tshs. 5 and Tshs. 4 a second in peak and off-peak periods, respectively. Zantel advertising and promotion manager William Mpinga said the increase in Excise Duty meant that the subscribers would now talk less on the same amount of money they used to pay prior to hiked tariffs. Zantel charges about Sh3.3 a second within the network during peak and off-peak periods. Mr Jackson Mbando, the Tigo public relations officer, said the company would compensate its subscribers by introducing more discount promotions to cushion them against the higher charges.

The Minister for Finance and Planning, Mr. Mustafa Mkulo raising up a briefcase that had contained a National budget speech for the financial year 2008/2009 at parliament buildings in Dodoma. This was in mid June this year when he was entering parliament buildings to read a speech.

The Chief Operating Officer (COO) for Zain (formerly Celtel) East Africa region, Mr Bashar Arafeh, said that despite the Tanzanian market being one of the most advanced in the region (in terms of the number of mobile operators), the Excise Duty increase was a disincentive that could have an adverse effect. "The Government has a role to play in ensuring that rural populations have access to mobile phones, he added. Analysts say that though there has been no direct increase in the airtime billing, subscribers will talk less for every shilling they spend on vouchers. For every Sh1,000 spent on a pre-paid airtime voucher, about Sh310 will go to the Tanzania Revenue Authority (TRA) and Tanzania Communications Regulatory Authority (TCRA), up from Sh280 before the Excise Duty increase. This amounts to an increased cost of Sh30 in actual airtime on every Sh1,000 mobile phone voucher. For every Sh1,000, subscribers will talk for 3.28 minutes on average, instead of 3.42 minutes they used to get. With a Purchasing Power Parity of $723 for an average Tanzanian, the three per cent increase in the cost of mobile phone calls means that a single subscriber will now use about Sh1,147 more a year, which will go to government coffers. But with about seven million active subscribers currently, the Sh1,147 increase will give the Government Sh20 billion more a year. The last time the Government increased tax on mobile phone airtime was in 2006/07, when it raised Excise Duty from five to seven per cent. This gave the Government an additional revenue of Sh15,661 billion for the period between July 2006 and January 2007. With the 10 per cent Excise Duty increase, Tanzania now joins Uganda as the countries with the highest mobile phone tariffs in East Africa. Uganda also levies 30 per cent tax on mobile phone services. Kenya has a 26 per cent tax on mobile services. Tanzania charges a one per cent TCRA levy on mobiles phones services. The high cost of airtime is being cited as one of the factors that may limit mobile telephone service growth in Tanzania. A mobile phone usage explosion has given many Tanzanians phone access and the number of mobile subscriptions is now 350 per cent higher than fixed-lines accounts. Mr Gerhard May, the CEO of Hits, a new mobile service provider, said the Excise Duty increase is a major drawback for customers and operators of mobile phone services. Customers are already burdened with the 20 per cent VAT and seven per cent Excise Duty. The Excise Duty increase to 10 per cent is not acceptable. According to him, this has made Tanzania one of the countries with the highest mobile phone tariffs in the world. The mobile industry is expected to generate $71 billion in tax revenue in sub-Saharan Africa between 2000 and 2012, but that figure could be higher if governments removed the taxes that categorise mobile phones and services as luxury goods, according to research commissioned by the GSMA. The research by Frontier Economics found that uptake of mobile services in the region was being held back by mobile-specific taxes on handsets, airtime and telecom equipment, which increase costs for consumers and deter investment by mobile operators.