Kenya Proposes New Data Centre Licence, Cutting Fee to KSh100,000

The Communications Authority wants to replace the KSh 15 million NFP-T2 licence with a standalone category costing KSh 100,000.

The Communications Authority published the proposed licensing framework on September 8, in a notice signed by Director General David Mugonyi, opening 30 days of public and stakeholder comment. If it goes through, the upfront cost of getting a data centre licensed falls from KSh 15 million (about $116,000) to KSh 100,000 (about $770).

What changes

Right now, a company that rents out rack space, power and cooling to other businesses is licensed as a Network Facilities Provider, Tier 2 (NFP-T2). That category was designed for firms that build communications infrastructure across the country, and its price reflects it. Under the CA's 2026 fee schedule, NFP-T2 costs KSh 15 million upfront for a 15-year term, plus an annual operating fee of 0.4% of gross turnover or KSh 800,000, whichever is higher.

The proposed Data Centre licence would cover co-location operators and the services that support them. Applicants would pay KSh 5,000 to apply and KSh 100,000 when licensed. The annual fee would be 0.4% of gross turnover or KSh 80,000, whichever is higher. The term stays at 15 years, and the 0.5% Universal Service Fund levy on gross revenue still applies.

Who actually needs it? The proposal targets the operator renting out space, power, cooling and related infrastructure to customers, not every company that happens to run servers in Kenya. A bank or a hospital hosting its own systems on its own premises wouldn't need one; a co-location provider selling rack space to that bank would.

Those figures match, shilling for shilling, what the CA charges for an Application Service Provider (ASP) licence. On price, data centres would move from the infrastructure tier to the service tier.

One clause deserves more attention than it has had. Companies that already hold an NFP or ASP licence would be allowed to set up and run data centres without taking out the new licence at all.

The CA's reasoning

According to CA, these facilities host computing power, storage and applications for businesses and "do not transmit signals, assign or use spectrum, or provide subscriber-facing services." The consultation paper says grouping data centres under NFP-T2 gave the regulator visibility into their operations, but also saddled them with requirements built for network operators.

That claim sits oddly next to one fee the proposal leaves untouched: the 0.5% Universal Service Fund levy, which supports universal access to communications services, would still apply to data centre revenue. If data centres aren't providing telecommunications services, it's a fair question why a telecoms-sector levy still does.

There's a competitiveness argument too: a standalone category, the CA says, would make Kenya more attractive than its regional peers for data centre investment. The paper cites the 2020 ICT Sector Policy Guidelines, which direct the government to license private investment in carrier-neutral data centres, and says it wants rules closer to lighter-touch regimes in comparable jurisdictions, though it doesn't name any.

Five months, two answers

Before this year, data centres had no named place in Kenya's licensing structure. Under the 2021 market structure, operators sorted out their licensing with the CA case by case, Business Daily reported.

Between early 2025 and April 2026, the regulator reviewed the whole telecoms market structure, published its responses to stakeholder submissions that September, and adopted the revised structure that April. That revision put commercial data centres under NFP-T2 and allowed NFP-T1 and NFP-T2 holders to run them without an extra licence.

During that review, operators argued that their business is space, racks, power and cooling, and has little to do with telecoms connectivity. The CA rejected that view, according to Business Daily, pointing to the hyperscalers, fintechs, international transit routes and submarine cable landing services that data centres host.

The KSh 15 million entry fee has been on the books for about five months, and the regulator now proposes cutting it by more than 99%. The CA may have listened to the industry, which is what consultations are for. It could also mean the April placement got data centres onto the register prematurely, before anyone had decided what regulating them should involve.

Either way, the CA appears to have reconsidered how data centres should be regulated, but it is a lot more precise about the price of entry than about what operators will actually be required to do. The new proposal settles the price. It says far less about that second question.

Who gains

Shaving KSh 14.9 million off the entry fee changes the economics on day one. It changes almost nothing after that. Both regimes charge 0.4% of turnover, so the real shift is only in the floor beneath it: KSh 800,000 a year under NFP-T2, KSh 80,000 under the proposed category. Divide KSh 800,000 by 0.4% and that floor stops mattering above KSh 200 million in annual turnover. Any operator already clearing that pays more than the old minimum regardless, meaning their yearly remittance stays identical.

That threshold rules out most of the capacity now coming online. Kenya had close to 20MW of data centre capacity in 2025, according to Business Daily, and the projects underway dwarf it: iXAfrica is expanding from 2.5MW to 22.5MW, Airtel Africa's Nxtra is building 44MW at Tatu City, and Digital Realty opened its 6.4MW NBO2 in Nairobi on September 7. Even a fraction of full occupancy at those capacities clears KSh 200 million a year, so the floor stops applying almost as soon as the lights come on. What these operators keep is the KSh 14.9 million saved at the start, not any relief on the annual bill. The saving matters far more for a sub-megawatt facility outside the capital, where KSh 15 million due before racking a single server could stall financing before ground breaks. At KSh 100,000, that upfront cost is far less likely to be the reason a project doesn't happen.

Another interesting complication is the NFP and ASP exemption. Companies that already hold either licence can run a data centre without taking out the new one, at any scale. Set that against a new operator paying KSh 100,000 for a licence priced identically to an ASP licence, and a real question opens up: what exactly is the new licence regulating, if some companies can provide the same data centre service without holding it at all? The paper doesn't say whether a facility run under an NFP or ASP licence reports the same things a standalone-licensed one would. Until it does, "regulatory visibility" describes an intention more than a mechanism. In practice, it could produce two tracks: pure-play colocation operators regulated under the new category, and facilities run by telcos and other existing licence holders continuing under the NFP or ASP rules they already have.

"Oversight" is still undefined

The paper returns to visibility and oversight several times without saying what either means in practice. The consultation paper does not set out detailed operational obligations such as uptime targets, redundancy requirements or incident-reporting rules. For its other licence categories, the CA sets obligations like these in separate terms and conditions. The data centre version hasn't been published.

What the final rules need to answer

The licence conditions will decide whether this is good regulation, and several gaps need closing before the CA finalises anything.

Operators need to know what they will report, and how that fits with data protection rules enforced by the Office of the Data Protection Commissioner. The CA needs to say whether data centres run under NFP and ASP licences carry the same duties as those under the new category. The paper has no transition provisions either, so an operator that paid KSh 15 million for NFP-T2 after April doesn't know whether it gets a credit, a conversion or nothing. "Associated supporting services" also needs a definition, because operators that sell managed services alongside rack space will need to know where the licence stops.

Responsibility for getting this right doesn't sit with the CA alone. The regulator should publish draft licence conditions before it finalises the category, so stakeholders can scrutinise the actual operating rules alongside the headline fee cuts. The industry got the separate category it had argued for. What it gets in the final conditions is still unsettled, and its submissions will carry more weight if they spell out what sensible compliance looks like as well as what it shouldn't cost. The banks, fintechs and public agencies whose systems sit in these buildings should be writing in too. They're the ones left offline when a facility fails.

CAK's roadmap puts finalisation in the 2026/27 financial year and implementation in 2027/28, but comments close on October 8th.