Telcos call for rational tax rates

The government should introduce a rational tax regime for the mobile operators and resolve disputes in the sector to help establish a 'digital Bangladesh', a senior official of Robi said.

“We are expecting a positive signal from the government in the upcoming budget,” Mahtab Uddin Ahmed, chief executive officer and managing director of Robi, told The Daily Star in an interview.

The operator is watching out for the government's stance on SIM and corporate taxes in fiscal 2017-18's budget announcement tomorrow.

“We believe that if our proposals are accepted the industry's contribution to the national development will increase manifold.”

In 2011, the SIM tax was Tk 600 and the industry's contribution to the economy then was 3.2 percent.

The SIM tax was halved in 2013 and the operators' contribution rose to 4.9 percent. In 2015, the SIM tax was brought down to Tk 100 and the industry's contribution edged up to 6.2 percent.

“Therefore, there is a clear case for bringing down the tax,” said Ahmed, the first local CEO of a foreign-owned mobile operator.

The rate of corporate tax, which stands at 45 percent, also needs to be brought down to the minimum level and the tax on consumption also needs to be lower to incentivise people to spend more.

Specifically, he said the value-added tax on internet usage must be removed to expedite the process of digital Bangladesh.

The industry can contribute up to $17 billion and create 8.20 lakh jobs, directly or indirectly, in 2020 if an enabling environment is created for mobile operators, Ahmed said referring to a report of GSM Association.

Currently, 54 percent of the country's population use mobile phone and the number would be much higher if the government reduces taxes, he said.

The Robi CEO also called for resolution of all outstanding disputes.

“There are too many disputes at the moment and they don't help in winning investor confidence. Besides, continued disputes over customs duty are easily avoidable -- all we need is to adopt a harmonised approach.”

Ahmed, who previously served as Robi's chief operating officer, said Bangladesh is the only country where VAT is imposed on spectrum fees.

Subsequently, he urged the government to remove VAT on spectrum.

About the planned launch of 4G services in the country, he said the government should plan for the long-term and frame regulations accordingly.

“We would like to see the spectrum fee payable over the entire 4G licence period. The rollout obligation as stipulated in the proposed 4G licensing guideline does not take into cognisance the reality on the ground.”

The Bangladesh Telecommunication Regulatory Commission has proposed Tk 150 crore as bank performance guarantee, which has to be paid in two separate segments: Tk 75 crore as rollout obligation and another Tk 75 crore to clear future dues, if any.

Under the rollout obligation, the operators will have to take 4G network to all divisional headquarters within the first nine months of getting the licence and to district headquarters within 18 months, according to the guideline.

They will get a total of three years to complete their rollout of 4G services across the country.

If the operators comply with the obligations, they will get a refund of Tk 25 crore in each segment.

Ahmed said the industry over the last three years has invested $3.80 billion to expand 3G coverage to 65 percent of the population. But, the operators only have 18 percent of their subscribers using 3G service at present.

“Hence, we humbly request the government to review the rollout obligations in light of the ground-reality.”

Since its inception in 1997, the industry has invested over Tk 100,000 crore in the country and managed to recoup only 3 percent of the sum, according to Ahmed.

“Only one operator is making profit now and the rest are struggling.”

The industry would like to be convinced that the licensing framework offers a sound business case for investors and a long-term roadmap is needed as well.

For the 2100 band the floor price recommended for per megahertz is $27 million, for 900 band $28 million and for 1800 band $35 million. 

The operators will also have to share, most likely, 5.5 percent of their revenue with the government from 4G service.

“The proposed framework has not convinced us that it can facilitate us to make a decent return on investment.”

When 3G was introduced back in 2013, the penetration rate for 3G-enabled handset was 8 percent. After three years, it has increased to 30 percent.

Robi has conducted a study and found that only 2.3 percent of the smartphones on its network are 4G-enabled.

According to its assessment, at most 4 percent of the smartphones in the country are 4G compatible.

“This makes you wonder how long it will take for us to create an enabling market for the growth of 4G in Bangladesh.”

Ahmed also said one-third of Robi's 3G sites are unable to generate enough revenue to cover for their operational costs.

Even though the industry is observing a major hike in data consumption, the service contributes to about 10 percent of the revenues.

In 2016, Grameenphone earned Tk 1,440 crore from mobile data services, Robi Tk 684 crore and Banglalink Tk 491 crore, according to the operators' financial statements.

“I wonder how long it will take for us to reach break-even, let alone make profit from 4G services.”

He also highlighted the importance of spectrum price calculation in a way that even the weakest operator can afford it.

Referring to 3G spectrum auction, Ahmed said due to the exorbitant price operators bought less spectrum, as a result of which a huge amount is remaining unused.

“Spectrum on its own has no commercial worth. It needs to be allocated first and then commercial entity having the right to use it needs to make significant amount of investment to monetise this precious resource.”

At present, there is 148 MHz of spectrum that has remained unallocated. “These are precious national resource that remains unutilised.”