Safaricom wins Sh1.4bn refund for 3G licence

 

A Safaricom Care centre. Safaricom has won a two-year legal battle for a refund of Sh1.4 billion ($15 million) from the communication regulator on claims that it overpaid for its 3G licence. FILE  NATION MEDIA GROUP

By Okuttah Mark

In Summary

• Safaricom says in its 2013 annual report it reached an out-of-court settlement with the Communications Commission of Kenya (CCK) for the refund that will be staggered over three years to June 2015.
• The Sh1.4 billion will be offset by the licence fees Safaricom pays the regulator in what will reduce the operator’s burden of paying the Sh2.3 billion permit renewal fees due next June.
• This means that Safaricom will be paying CCK less Sh450 million annually in the three years to June.

Safaricom has won a two-year legal battle for a refund of Sh1.4 billion ($15 million) from the communication regulator on claims that it overpaid for its 3G licence.

The operator says in its 2013 annual report it reached an out-of-court settlement with the Communications Commission of Kenya (CCK) for the refund that will be staggered over three years to June 2015.

The Sh1.4 billion will be offset by the licence fees Safaricom pays the regulator in what will reduce the operator’s burden of paying the Sh2.3 billion permit renewal fees due next June.

READ: Safaricom to pay Sh2.3b for renewing licence

The court battle was triggered by the regulator’s decision to lower the 3G fees of Sh873 million ($10 million) paid by Airtel and Telkom Kenya, prompting Safaricom to ask for a refund from the Sh2.2 billion ($25 million) it had paid in 2007.

“In February 2013, the suit was settled by consent with CCK agreeing to refund, by way of credit notes against their other fee invoices, the USD 15 million in three equal instalments over three financial years to June 2015,” read part of Safaricom’s annual report.

This means that Safaricom will be paying CCK less Sh450 million annually in the three years to June.

CCK in 2010 said the move to cut the fees for the small operators was meant to remove barriers of entry and make the data market more competitive.

READ: Safaricom stokes row with CCK over 3G refund

However, Safaricom argued that CCK had a statutory obligation to treat its licensees equally, saying they should not have to suffer for having taken the licence early.

“In order to attain the principle of equality in licence fees, Safaricom filed High Court Misc. Application No. 197 of 2011, seeking a refund of USD 15 million from CCK being the extra amount paid for the 3G licence,” said Safaricom in the annual report.

The three operators, Zain (now Airtel), Telkom Kenya and Essar, aggressively lobbied for a cut in 3G prices, saying they may not recoup their investments with the high fees and need a fee cut to enable them compete effectively in the data segment which is seen as the next frontier for revenue growth in the telecommunications sector.

The move to slash fees was not unique to Kenya as it has been done in markets like France amid opposition from big operators.

Kenya’s biggest telecoms operator must pay $27 million (Sh2.3 billion) and meet quality standards for its licence to be renewed for a 10-year term that will end in 2024.

The inaugural permit was issued in July 1999 for a term of 15 years at a fee of $55 million (Sh4.7 billion).