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Monkey business in mobile phone tax

Abu Saeed Khan
The proposed tax provisions for mobile phones remind us the mathematical problem that many had solved in their schooldays. It was about a monkey's desperate attempt to climb up an oily pole and figuring out the poor animal's numbers of unsuccessful attempts to reach the top.
We, the persevered monkey's evolutional descendants, have been similarly struggling to grab an affordable mobile phone. There were only 3,000 users when mobile phone was an expensive personal gadget of the society's affluent segment.
Competition was introduced in 1996. Since then mobile phone gradually became a generalpurpose communication tool and today it boasts of 6.25 million users representing a 132 percent compound annual growth rate.
Our mobile phone industry, however, should have progressed much more in the market of 140 million people. Obsolete policies and dysfunctional regulatory regime have been dwarfing its growth.
Middle to higher income citizens have been dominating the mobile clientele. Lately the lower income group started joining the club. It was fuelled after Banglalink rocked the market by bundling subscription and handset at Tk1,500 only. People became euphoric after the flawed launching of Teletalk.
AKTEL stunned the market introducing one-second pulse. GrameenPhone made history with launching EDGE, the very first step towards third generation mobile phone. CityCell's free handset offer coincided with SingTel's acquiring this CDMA operator last week.
Graph of our mobile phone market's growth was to take the shape of a "Hockey-stick" by this year. The government has, however, completely failed to envisage this prospect.
In his budget speech, the finance minister has proposed to reduce the existing Tk1,500 duty to Tk300 for any mobile handset. It will certainly make the handsets more affordable and thwart the black market.
Therefore, instead of getting cheated by used and refurbished gadgets, the customers will now use brand new handsets with longer battery-life, full warranty and guaranteed after sales supports.
The reduced flat duty will also proliferate the usage of reputed handsets supporting mobile multimedia applications. It is a good news for the minority upmarket consumers.
The finance minister has, however, punished the majority of the low-end prospective consumers. He
has proposed a Tk1,200 levy on every new subscription. It is a big blow to the operators' increasing competition in cost reduction. If implemented, it will also affect the level playing field.
Equipment manufacturers and mobile phone operators have now targeted the emerging markets with high-growth potential. They have been racing to grab the next billion subscribers from such markets, which monthly generates around Us$5.00 revenue per user. Since this subscriber base has the potential of growing in millions, the industry is naturally attracted to this market. The recent entry of Orascom and SingTel in Bangladesh market confirms this trend. The Dhabi group's keen desire for a mobile licence further demonstrates the potential of our market.
Instead of being receptive the government has rather shown harshness with Tk1,200 tax for
every mobile phone connection. The government's number jugglers never succeed to comprehend the dynamics of value-chain in a networked economy.
More than 90 percent of the population is now under private mobile phone networks. They have liberated the people from distance barrier. Everybody is exploiting the magical advantage of being connected with everybody. Invisible wheels of our economy are spinning with the acceleration it had never experienced. It will be suicidal if the government slows it down.
Every mobile phone user pays a 15 percent value added tax (VAT) for every minute he talks. A mobile phone subscriber talks for 300 minutes per month on an average. The government should assess the amount of VAT it has collected from each operator in the last fiscal year before imposing the unrealistic tax on new subscription.
CEOs of the mobile phone operating entities have just announced their ambitious investment plans with high sales targets. They are unlikely to be on course if the government hammers with impractical taxation.
The proposed Tk1,200 tax per new subscription is also inconsistent with the level playing field. For example, it is very easy to tax a GsM operator while it imports the sIM cards because a GsM operator cannot activate its connections without a sIM card.
That is, however, certainly not the case with CDMA phones. Unlike GsM, using a sIM card is optional in CDMA. A CDMA phone can be activated as it does not have any sIM card at all. Evidently, the new tax provision offers phenomenal degree of undue advantage for CDMA.
Therefore, it has to be scrapped to protect greater public interest as well as for the sake of a level playing field in our mobile phone industry. Otherwise we will keep on climbing the oily pole of a puritan establishment. Now, it will be the monkey's turn to laugh at us.
The writer is a telecoms analyst.