Kenya's Data Centre Licence Costs 0.9% of Revenue, Not 0.4%

Kenya's Communications Authority wants colocation data centres out of the telecoms licence class they currently sit in and into a category of their own. Coverage so far has led with the fee: KShs 80,000 a year or 0.4% of annual gross turnover, whichever is higher. Measured against what a data centre is supposed to pay today, that is a discount. Entry falls from KShs 15 million to KShs 100,000. The 0.4% is not new either, it is the house rate across nearly every category in Kenya's Unified Licensing Framework.

The genuinely new recurring liability sits in paragraph 18, and none of the write-ups mention it: a further 0.5% for the Universal Service Fund.

The proposal runs to seven pages. Proposed Licensing Framework for Data Centres (Consultation Version) went up on ca.go.ke on 8 September 2026 with comments open for 30 days, one day after Digital Realty announced a new Nairobi data centre, dated 7 September. Nothing much should be read into the sequence. A regulator's consultation paper is not drafted overnight in response to a ribbon-cutting.

Entry falls from KShs 15 million to KShs 100,000

Paragraph 16 sets the proposed fees. Set them beside Network Facilities Provider Tier 2, the category data centres sit in today under the CA's Revised Telecommunications Market Structure (June 2026):

The percentage never moves. That 0.4% is the standard annual operating rate the CA applies across most of the framework, so an operator reading it as the new burden is reading the one line that did not change. What changed is the KShs 15 million cheque at the door, and the floor underneath the annual fee.

The 15-year term carries no particular meaning either. Fifteen years is the standard term across the market structure's infrastructure and service licences, from Tier 1 network facilities down through application and certification services. It is the framework default rather than a judgement about how long a data centre should be licensed for.

Put the two schedules side by side and something else shows up. The three proposed numbers are the three numbers already sitting on the Application Service Provider and Electronic Certification Service Provider lines of the market structure, which both read KShs 5,000 to apply, KShs 100,000 to start, and annually "0.4% of Annual Gross Turnover or Kshs. 80,000.00, whichever is higher." Rather than design a fee for data centres, the CA appears to have moved them from the infrastructure tier of the schedule (heading A, initial fee KShs 15 million) to the service tier (heading D, KShs 100,000) and reused a row that was already there. That reading comes from comparing the two published schedules; the consultation does not say so itself.

The floor stops mattering above KShs 20 million of turnover

"Whichever is higher" has a crossover point. Solving 0.004 x turnover = 80,000 gives KShs 20,000,000, about US$154,500 at 129.45 shillings to the dollar (open.er-api.com, 13 September 2026). Below that you pay the floor. Above it the floor never matters again.

Under the current NFP Tier 2 treatment the crossover sits at KShs 200,000,000, roughly US$1.54 million, and the gap between those two lines is where the change bites. A colocation business turning over KShs 50 million was paying an effective 1.6% under the Tier 2 floor. Under the proposal it pays 0.4%.

Worked against the published rates:

The floor binds only below KShs 20 million of turnover, about US$154,500 a year, which is a low bar for anything running as a commercial colocation business. For most of the operators it applies to, the KShs 80,000 that led every write-up is the least useful number in the table. Above KShs 200 million the two regimes converge on the annual fee entirely and the saving collapses back to the KShs 14.9 million difference at the door.

No Kenyan carrier-neutral colocation operator publishes revenue that TechCurrent could retrieve, so the turnover column is a ruler rather than an estimate of anyone's business. The arithmetic behind the crossover is exact whatever revenue you put into it.

Paragraph 18 adds 0.5% for the Universal Service Fund

The paragraph, in full:

"USF fees will be handled as provided for in the law (section 84 J (3) KICA Cap 411A). Currently, USF fee is charged at the rate of 0.5% of the Annual Gross Revenue with respect to licensed services."

That is Kenya's mechanism for subsidising connectivity in unserved areas, and it sits on top of the annual operating fee. Recurring regulatory cost under the proposed licence is therefore 0.4% plus 0.5%: 0.9% of gross revenue. The Connecting Africa report that most downstream coverage is built on does not mention the fund at all.

For an operator already carrying an NFP Tier 2 licence this changes nothing, since Condition 2.3 of the NFP Tier 2 terms already requires contribution. For a colocation business that has never held a CA licence, it is a new line in the model.

The statute the CA cites charges the levy on revenue "with respect to licensed services." Whether rack space, power, cooling and cross-connects count as a licensed service depends on whether a licence exists that covers them, so creating the category is arguably what makes colocation revenue assessable in the first place. The consultation does not settle it. That is a reading of the text rather than a position the CA has taken, and it is the single strongest thing an operator could put in a written comment.

Condition 13.8 asks a colocation operator for the duration of a call

The stated reason for the new category is sound. Paragraph 11 puts it plainly: data centres "provide co-location, power, and cooling services, and do not transmit signals, assign or use spectrum, or provide subscriber-facing services." The executive summary says a separate category avoids "the over-application of Network Facilities Provider (NFP) licensing requirements."

"Over-application" understates it. Read the NFP Tier 2 conditions and the mismatch is structural. Condition 7 governs numbering and number portability, and requires the licensee to use only numbering resources assigned by the Authority and to provide porting facilities at its physical customer care outlets. Condition 7.4 requires it to configure the national emergency numbers and deliver emergency traffic generated on its network free of charge. Condition 10 requires it to make its licensed systems available for emergency services at no charge and to interconnect them with the communication systems run by the police. Condition 6 requires compliance with the quality-of-service requirements in Annex 2 and the filing of a reference service level agreement. Condition 3.1 requires network schematic diagrams with topographical coordinates in WGS84 before construction begins.

Then Condition 13.8, which requires the licensee to produce a billing record for any subscriber containing, at minimum, "calling number, called number, date, time, balance before a call, duration of call, amount charged, and balance after the call."

A business selling rack space, power and cooling has no calling party, no called party and no call duration. Under its current licence class it is asked to produce them anyway.

A colocation operator cannot comply with 13.8 in principle. The facts the condition asks for do not exist in the business.

Anyone already holding a telecoms licence is exempt

Paragraph 17 is the part nobody reported:

"Entities that have Network Facility Provider (NFP) or Application Service Provider (ASP) licences shall be permitted to establish and operate data centres without the need for a data centre licence."

The June 2026 market structure already says the same for Tier 1 and Tier 2 holders. Safaricom, Airtel Networks Kenya, Jamii Telecommunications and Telkom Kenya hold NFP Tier 1. Liquid and WIOCC are among the 35 holders of Tier 2. The Application Service Provider register runs to 665 entries. An exemption that broad leaves the new licence binding almost exclusively on independent carrier-neutral operators, which is the category of investor the framework says it wants to attract. Telco-owned data centres carry on under licences they already hold.

Whether that produces a competitive-neutrality problem is a fair question to put to the CA in the consultation. It is not evidence of intent, and the consultation does not address it.

Visibility is the word the consultation keeps returning to. Paragraph 15 says the framework will "enable the required regulatory visibility on the operations of colocation data centres in Kenya." The CA's own Register of Telecommunications Licensees as at June 2026 shows what that means. It lists four NFP Tier 1 licensees and 35 at Tier 2, and the Tier 2 names are mostly tower companies, satellite operators, fibre carriers and utilities. Searching it for the names of Nairobi's major carrier-neutral colocation brands returns nothing.

That is a search result and not a legal finding, and it should be read with care. Kenyan operating entities are frequently registered under corporate names that differ from the brand on the building, and the register predates the newest facilities. It is still consistent with a regulator that has very little sight of a segment it is now proposing to license, roughly the position Nigeria's central bank found itself in before it reopened its sandbox to the crypto firms it had cut off.

Nothing in the consultation defines a data centre

There is no definitions section, no megawatt or floor-area threshold, and no line drawn between carrier-neutral colocation, an enterprise facility, a hyperscaler self-build and compute sold by the GPU-hour.

That gap matters most to the sovereign-AI and GPU-hosting projects being announced across the continent. An AI compute provider that owns its shell looks like a data centre licensee. The same provider renting cages inside someone else's facility looks like an Application Service Provider, and under paragraph 17 an ASP licence exempts it from the data centre licence entirely. Ownership of the building decides which rules apply, and the consultation nowhere acknowledges the distinction.

The economics point the same way. A levy on gross turnover scales with revenue per megawatt, and revenue per megawatt for GPU hosting is far above what rack-and-ping colocation earns from the same power draw. The hardware filling those halls is a different class of machine and it is sold by the hour. A 0.9% turnover levy is a materially different instrument applied to AI compute than to traditional colocation. TechCurrent has no Kenyan GPU-hosting revenue data to model that against, so treat it as reasoning about the shape of the instrument rather than a projected figure.

The Microsoft and G42 Kenya package announced in May 2024 sits awkwardly in the same gap. It pairs an initial $1 billion investment with a data centre campus at Olkaria "run entirely on renewable geothermal energy," a new East Africa cloud region and an open-source large language model trained in Swahili and English. Operator-run infrastructure for a cloud region is not carrier-neutral colocation on a plain reading of the proposal, and if the operator holds an NFP or ASP licence, paragraph 17 exempts it regardless. TechCurrent did not verify the project's current build status and makes no claim that the facility is operational. Either way, a billion-dollar AI-adjacent infrastructure commitment may sit outside the framework written to give the regulator visibility over critical digital infrastructure.

Digital Realty's Nairobi facility is the cleaner case. Connecting Africa reports it as NBO2 with 6.4MW of capacity (that name and figure come from Connecting Africa, not from Digital Realty's own release, whose body TechCurrent could not retrieve). A carrier-neutral colocation build is squarely what the new category is for.

There is no published closing date

The CA's notice says only that comments are invited "within thirty (30) days from the date of publication of this notice," and neither the notice nor the PDF states a publication date. The document was created on 8 September 2026 at 09:32 East Africa Time according to its own metadata, and the server reported it as last modified the same day. Thirty days from there lands around 8 October 2026, which is an inference from file metadata and not a date the CA has stated. File early and confirm with the Authority.

Three channels, all live as of 13 September 2026:

- Email: datacentres@ca.go.ke - Online form: forms.cloud.microsoft/r/uB4Z5GktUB - Post or hand delivery: Director General, Communications Authority of Kenya, P.O. Box 14448-00800, Nairobi

Worth a written response: the absence of any definition of a data centre or a size threshold, which decides whether a GPU host or a small edge facility is in scope at all; the scope of "Annual Gross Turnover," which the consultation never limits to the licensed activity and which matters enormously to a diversified group; and the Universal Service Fund treatment of colocation revenue, flagged at 0.5% without any statement of whether rack space is a licensed service.

The CA's roadmap puts the consultation, the finalisation of the framework and the consequential revision of the market structure all inside the 2026/27 financial year, with implementation in 2027/28. Everything above is a proposal. But 0.4% is the rate the CA already charges almost every other licence category that pays a percentage at all, and that is not the sort of number a consultation usually moves.

“A business selling rack space, power and cooling has no calling party, no called party and no call duration. Under its current licence class it is asked to produce them anyway.”

Reporting by TechCurrent Staff · TechCurrent