SIM tax must go this time

Banglalink CEO Ahmed Abou Doma shares his thoughts on budget, telecom law

SIM tax stands as a major obstacle to the prospective customers as the newcomers will not be richer than the previous ones, says the chief of the second largest mobile operator in Bangladesh.
Chief Executive Officer of Banglalink Ahmed Abou Doma says such tax should go in the upcoming budget, which he thinks will have a significant impact on the growth of the industry and gross domestic product (GDP).
“Let me start by saying, it's now or never. It's time for the SIM tax to go; it's a shame.”
Doma says this tax hardly exists in other countries. Some have different names for it but in a very nominal value. The present tax is Tk 800 or around $11.51 in Bangladesh. The tax is $1.36 in India, $3 in Pakistan, while Sri Lanka, Cambodia and Indonesia do not impose any SIM (subscriber identity module) tax.
The government may think, Doma says, why it should not take such tax. The government should realise that if the SIM tax is waived now, the revenue that it will get later is much higher, he points out.
The Banglalink CEO says if the revenue does not increase after waiving the SIM tax, the government can again impose it later.
“Give us a chance, give our theory a chance and by the way it's not a theory, it's a proven scientific methodology that shows that 10 percent increase in penetration gives you 1.2 percent increase in GDP."
Contribution of the mobile phone companies to the national exchequer is very high and SIM tax is not the highest among the contributing factors.
“Even removing the SIM tax now, the direct hit on the exchequer is minimal compared to the rest of the items, because we pay VATs on every recharge, licence, frequency fees and revenue share to the regulator. So these make a huge contribution and the SIM tax is not the major one.”
Doma says: "We have 55 million subscribers now. Do you think the next million subscribers will be richer than the previous ones? Of course not. These are poor people somewhere in the rural area."
On the proposed amendment to Bangladesh Telecom Act 2010, he says: “The new telecom act is actually unconstitutional as it doesn't give the operators the right to appeal.”
Doma does not think that it is an investment-friendly law. “You are actually threatening the existing investments in the country. That includes even arresting and putting officials of companies in custody and not having the right to appeal.”
The second point Doma made is related to the fines. In the proposed amendment, the maximum amount of fine has been set at Tk 300 crore, which he says is not practical, as some of the operators who will be subject to that law do not have a paid-up capital more than Tk 10 crore. "This means they are not being penalised, they are being put of business and moreover arrested. What kind of investment climate is this?” The maximum fine in Asia is $2.5 million.
He says Bangladesh's telecom market having six mobile operators is over-crowded.
"With my work with Orascom Telecom I have been exposed to 12 different markets. I think this market is the most competitive one. We do not need six operators; three would be more than enough.”
France and Egypt have three operators each, while China has two. "If you look at India, they have actively 7-8 operators. Then you look at the target population. They have 1.2 billion inhabitants, so every operator on an average is targeting 125 million subscribers, while 150 million Bangladeshis are targeted by six operators. So every operator has a potential theoretical target of 25 million only." There are other aspects such as GDP, which is higher in India, says Doma.
Although competition is good for the end-users, many of the operators may not be able to continue to be in the race, the Banglalink boss says.
"That is not going to be a good sign for the telecom investment in this country."
The weak operators are looking for external arms for financial support so they can continue the race. "I don't want to mention names, but there are operators that won't be able to continue," Doma says.
The positive sides are many as well. An enlightened government and the bodies that understand the potential that this country has in terms of telecom and how much this industry be the locomotive to drive the whole economy can make a huge difference, he says.
There are some officials who are showing signs of understanding. "That was not there when I first came here but I find more of them accepting and embracing that approach."
“Those who will be able to continue in this bone breaking race in Bangladesh will benefit in the long run. But for now it's tough time."