Somali government eyes $100m annually from telcos with new law

Telecommunication companies will now come under a unified regulatory framework thanks to the endorsement of the Telecommunications law by Parliament which among others gives the government the requisite legal instruments to raise more revenues from telecommunication companies in the country.

Parliament this week passed the National Telecommunications bill whose passage has remained elusive in successive parliaments effectively ending a self- regulatory framework in favour of a statutory regime.

The bill which now awaits the President’s assent is one of the key instruments of revenue mobilization and generation as the Federal government reforms the tax system to enhance domestic revenue collection. Finance Minister Abdirahman Beyle said in his 2017 Appropriations Act detailing the national budget that the government could generate up to $100 million from telecommunication companies once the bill is passed into law.

Currently, telecommunication companies pay a lump-sum negotiated presumptive tax which amounts to $4.8 million annually. In the 2017 budget, Finance Minister set a 15% sales tax on telecommunication companies. The World Bank last week in its second Somali Economic Update proposed a 5-10 per cent tax on the value of airtime sold by cellphone companies and a further charge on landlines and revenue received by telephone companies for handling incoming international calls.

The new Telecommunication law should it be assented to by President Mohamed Farmaajo creates a National Telecommunication Authority vested with the powers to regulate not only telecommunication but also internet and broadcast services. The body is made up of two members from the Post and Telecommunications Ministry, four from telecommunication companies, and one from the Bar Association of Somalia. It will be also have a director and a secretary. Once the members are chosen, they will elect a chairperson who will serve for a four year term.

The NTA will be tasked with licensing, will develop framework on tariffs charged by telecommunication companies, arbitrate in cases from consumers or among companies, and safeguarding the rights of consumers. The body will also ensure fair competition in the industry to allow growth. Currently Hormuud Telcom enjoys a lion share of the telecommunication industry with the rest shared by National Link and Somtel.

The NTA will also manage the country code (+252) and the Country Top Level Domain (dot.so) and will be responsible for issuing national numbers.

The law could also boost the government’s security efforts as it will now have a legal framework which allows for regulation of terror financing. The government raised concern last month that telecommunication companies could be aiding transfer of funds to militant groups like Al-Shabaab calling for stringent vetting to curtail such transfers.