Market News
Mobile phone sales up 6pc in defiance of excise tax
Friday March 10 2023
Consumers bought 3.78 million more mobile phones in the six months that ended December 2022 compared to a similar period a year earlier. FILE PHOTO | SHUTTERSTOCK
Consumers bought 3.78 million more mobile phones in the six months that ended December 2022 compared to a similar period a year earlier, defying the introduction of excise tax that made the gadgets costlier.
Industry data from the Communications Authority (CA) shows that 63.36 million mobile phones were in use in the period, a 6.3 percent rise from 59.58 million in the six months that ended in December 2021.
The rise comes despite the introduction of a 10 percent excise tax on all imported mobile phones from July 1, 2022, a levy that made the phones costlier and was anticipated to depress demand, especially for smartphones.
“The trend indicates an increasing demand and uptake of smartphones mainly driven by demand for broadband-enabled services and accessibility to the devices,” the CA says in the report.
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The data shows that smartphones accounted for more than 90 percent of the increase as the number of gadgets rose to 29.74 million at the end of December last year, compared to 26.51 million in a similar period a year earlier.
Feature phones that are popular with the low-income economic band rose marginally to 33.61 million in the period from 33.06 million in a similar period that ended in December 2021.
The Treasury imposed a 10 percent excise tax for every mobile phone imported from July 1 last year, prompting telcos to pass the changes to consumers in the form of price hikes.
SIM cards also went up from July last year following the imposition of a tax of Sh50 for every imported ready-to-use SIM card, through the Finance Act 2022.
Safaricom said it would increase the prices of imported mobile phones to reflect the tax changes, barely two weeks after the new tax took effect.
The telco also added it would factor in a 25 percent import duty introduced that month as part of the Common External Tariff.
A surge in demand for smartphones has led to cut-throat competition as mobile phone manufacturers introduce new models with slight variations in phone specifications and prices in a bid to grow sales.
Telcos, notably Safaricom, also allow customers to buy smartphones through the redemption of their loyalty points and cash top-ups, highlighting the smartphone craze in the country.
The telco also allows customers to buy smartphones through the Lipa Mdogo Mdogo initiative where they make daily payments of as low as Sh20.
Telkom Kenya –the third largest telco— in June last year introduced a mobile phone purchase deal that allows customers to buy the gadgets through hire purchase.
A necessity
Smartphones have become a necessity for the middle class, offering remote working platforms and enabling students, especially in higher learning to study online.
The feature phone market continues to thrive albeit at a slower pace than smartphones mainly in the lower-income band and those in far-flung areas where network coverage is shaky.
Read: New 10pc phone tax takes effect Friday
Feature phones are also preferred for their long battery life and also offer an alternative for callers who are keen on not getting tapped by bugs that are common with smartphones.
