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TMCNet:  Nokia Says VAT On Mobile Phones Is Hurting Sales, Seeks Zero-Rating

[January 24, 2014]

Nokia Says VAT On Mobile Phones Is Hurting Sales, Seeks Zero-Rating

(AllAfrica Via Acquire Media NewsEdge) The introduction of 16 percent value added tax on mobile phones in September last year has cut Nokia's mobile phone sales by 20 per cent, the company has said.

Nokia East Africa general manager, Bruce Howe said the governments decision to add tax on the previously zero rated mobile market pushed up the price of phones leading to a drop in sales.

"We are working with the respective bodies to try to revert the decision on mobile device taxing because over 50 per cent of market is now on gray market," Bruce said during the launch of new Nokia Lumia and Asha smartphones in Nairobi.


Gray market is the sale of imported goods (brought by small import companies or individuals not authorized by the manufacturer) which would otherwise be more expensive in the country they are being imported to.

He expressed concerned that the gray market is taking a significant portion of Nokia's market by trading in cheaper phones, thus avoiding paying tax.

Bruce said the declining customer demand for Nokia devices is because the firm has to add up a considerable amount to the original price of device to cover the tax.

"The pricing of our devices has gone up 20 per cent in order to cover the 16 per cent increase in VAT, thus reducing demand," Bruce said.

However, Bruce said the new range of Nokia's premium smartphones together with the pending acquisition of Nokia device department by Microsoft, is expected to reposition the firm back in the market and help in regaining sales and push the firm back to profitability.

"Windows phone 8 being our smartphones' operating system of choice, the acquisition by Microsoft is now on final stages of regulatory and shareholders approvals,and we hope the buyout will help promote the Nokia brand," he said.

According to Bruce, the closing of the deal is expected by end of March. Nokia has been struggling to regain its leading position in the global mobile device market, after it was attacked by Samsung and Apple - who have been competing on the edge of technological masterpieces for budget customers.

To that end, Nokia has introduced Asha 500, 502, and 503 models and Lumia 1520 and 1320 models.

Copyright The Star. Distributed by AllAfrica Global Media (allAfrica.com).

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