Safaricom concerned about MTR losses and potential tax demands

Safaricom concerned about MTR losses and potential tax demands

There’s been some slightly disconcerting financial news for operator Safaricom in the past few days. The Kenyan giant expects to sustain losses from mobile termination rate (MTR) cuts and, possibly, to be hit with tax demands if plans to split mobile money service M-Pesa from its main business go ahead.

Safaricom has projected a loss of Sh2 billion (about US$16.2 million) in the financial year ending March 2023 after the Communications Authority of Kenya (CA) cut mobile termination rates (MTR) by 41.4%. As we reported in August, the rate was cut from Sh0.99 per minute (just under one US cent at present exchange rates) to Sh0.58 per minute.

Safaricom was a major beneficiary of MTRs; users of smaller operators are likely to spend more time on other networks than their own. Not surprisingly, smaller players are happier than Safaricom with the cut.

Safaricom has also expressed concern that the Kenya Revenue Authority (KRA) might use the current tax laws to hit it with taxes such as the capital gains tax (CGT) if it goes ahead with a planned internal reorganisation process to split M-Pesa from its telco business.

According to Business Daily Africa, Safaricom wants to look at government tax waivers before proceeding with the plan, which could see M-Pesa directly take on the country’s banks as a separate company while remaining a subsidiary of Safaricom.

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