Telecom Tax: Ethio Telecom & Safaricom To Pay 1.5% For Universal Access

Ethio telecom, Safaricom required to contribute 1.5pct of revenue

Telecom operators will now be required to contribute 1.5 percent of their gross annual revenue to a federal fund dedicated to expanding access to communication networks. Last year’s financial reports suggest Ethio telecom and Safaricom Ethiopia’s combined contributions could be valued at upwards of 2.5 billion Birr each year.

A regulation newly approved by the Council of Ministers establishes the Universal Access Fund under the Ethiopian Communications Authority (ECA).

While the Authority is mandated to invest what it collects from operators to finance communications projects, the regulation also allows it to invest in business areas including fixed bank deposits, government securities, or other investments approved by its board.

As it stands, the state-owned Ethio telecom, which generated 162 billion Birr in revenue last year, and Safaricom Telecommunications Ethiopia (7.2 billion Birr) will be the fund’s primary source, apart from grants and investment income. They are required to make the contribution within three months of the close of the financial year.

The regulation grants new entrants a three-year grace period before they are also obliged to give up 1.5 percent of annual revenue to the fund.

However, the regulation stipulates that contributions do not necessarily have to be in cash. Operators will also have the option to “provide proportional services and infrastructure that aligns with established Universal Access objectives.”

Officials say the fund will be utilized to finance universal communication access through subsidies and grants, with priority granted to projects that would not be feasible without the support of the fund.

Projects that effectively and sustainably expand access to communications infrastructure, systems and services through ‘smart subsidies’ with minimal one-time funding will also be financed through the Fund, according to the regulation.

While official figures put the total number of cellular connections in Ethiopia at well over 80 million, much of the population has little or no access to telephone and internet services. Some studies suggest that as many as 75 percent of Ethiopians are offline.