VAT charge cuts Nokia sales 20pc in three months

Nokia head of product South East Africa Patrick Henchie (left) and Bruce Howes, Nokia’s GM for East Africa display the 6-inch Lumia smartphones the Nokia Lumia 1520 and the Nokia Lumia 1320 during the introduction into the in Kenyan market on January 23, 2014 in Nairobi. Photo/SALATON NJAU  

By OKUTTAH MARK

In Summary

• Nokia East Africa General Manager Bruce Howes said that the handset maker had lost sales following a review of phone prices to reflect the new tax.
• The tax, he said, will erase gains made by the handset manufacturer since 2009 when VAT on portable telecom devices was scrapped to boost the use of mobile phones.

 

Nokia sales dropped 20 per cent in the three months to December following an imposition of VAT on handsets which has seen consumers turn to cheaper counterfeit phones.

The government introduced a 16 per cent value added tax charge on a number of items including medicine, newspapers and books in September, sending the retail price of the goods higher.

READ: Manufacturers warn VAT will increase cost of mobile phones

Nokia East Africa General Manager Bruce Howes said that the handset maker had lost sales following a review of phone prices to reflect the new tax.

“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.

The tax, he said, will erase gains made by the handset manufacturer since 2009 when VAT on portable telecom devices was scrapped to boost the use of mobile phones.

Cheaper counterfeits

Mobile penetration in Kenya has jumped from 45 per cent in 2009 to 76.9 per cent in September 2013, according to the Communications Commission of Kenya (CCK).

In Kenya, the firm has seen increased competition from Huawei, LG and Samsung especially in the high end of the market which is served with tablets and smartphones.

The rise in phone prices has seen more users turn to cheaper counterfeits, hurting the sales of mainstream players.

The Anti-Counterfeit Authority says the country loses nearly Sh3.2 billion annually through tax evasion and sale of counterfeit phones, which is emerging as a money minting machine in downtown Nairobi and across major urban centres.

Mobile phone operators switched off fake phones in 2012 following a directive from the CCK, but rogue technicians are unblocking the fake phones.

READ: Kenya's mobile subscribers fall to 29.8m

Mr Howes was speaking during the launch of the firm’s first 6-inch Lumia smartphones in Kenya, the Nokia Lumia 1520 and the Nokia Lumia 1320.

The Nokia Lumia 1520 will be available in black at a recommended retail price of Sh69 999, while the Nokia Lumia 1320 will come in yellow, black and white at Sh37,999.