High taxation and inadequate spectrum allocation are seriously hindering the growth of mobile internet in Bangladesh, ultimately affecting the poor segment of the people, a recent study conducted by GSM Association has revealed.
Looking at the total cost of mobile ownership for consumers, tax is more than 30 per cent of cost for a 'basic usage basket' and over 20 per cent for a 'high usage basket' in Bangladesh, says the study which came out last week.
The study titled 'Bangladesh: Driving mobile-enabled digital transition' noted that despite huge investments from the mobile operators, mobile internet uptake in Bangladesh is still low at 33 per cent in the second quarter of 2017 which is below the average of 38 per cent in South Asia.
Network quality, spectrum availability at affordable prices, taxation, affordability of services, basic skills and local relevance were cited as some key barriers to greater adoption of mobile internet in the country.
"Mobile operators in Bangladesh paid nearly $1 billion in recurring tax payments in 2016, which represented around 45 per cent of total sector revenue," said the report while noting that this US$ 1 billion amount excludes one-of spectrum and licence fees.
"Many of the taxes paid by mobile operators are specific to the sector or imposed at higher rates for mobile than other industries," it added.
"For example, corporate tax is at 40-45 per cent if the operator is publicly listed, regulation revenue fees are 5.5 per cent and universal service fund (USF) revenue rate is 1 per cent."
"This is a key factor in raising the affordability barrier for consumers," the report noted.
The GSMA findings came at a time when the country's telecom regulator is getting ready for the introduction of 4G services in the country.
The long-awaited auction for the 4G spectrum will be held on February 13 next year and the names of the winners will be announced on February 14.
Mobile operators have long called for making the 4G guideline investment-friendly. However, according to the telecom regulator, most of the concerns raised by the operators have been addressed in its final guideline.
The GSMA analysis specifically pointed out that the amount of spectrum assigned to mobile operators in Bangladesh is low compared to other markets.
"For example, only 70 MHz of spectrum has been assigned to 3G services," the study mentioned while noting that in Indonesia, which has a similar volume of population spread across a wider territory, 300 MHz is currently being used in different bands for 3G services.
In addition, the report pointed out that no digital dividend spectrum has been released so far while noting that doing so would enable operators to reduce capital and network costs and accelerate rollout and lowering prices for end users.
"Furthermore, the spectrum that has been assigned so far is not technology neutral, so mobile operators can only offer 3G on a subset of the 2100 MHz band," the report said.
The GSMA, in its study, opined that high levels of taxation and spectrum prices can have a significant negative impact on the incentives for mobile operators to invest in network infrastructure, and could have long-term implications for network coverage and 3G expansion.
"Regulatory fees and payments imposed on the mobile sector can represent a high burden and can vary substantially and unexpectedly from one year to another, adding uncertainty for market players," it said in the report.
"High upfront investment required for mobile infrastructure and long repayment cycle present a number of risks to operators: in particular, once investment has been made, any unexpected changes in taxation and regulatory fees can impact directly on profitability, lowering returns," it added.
The GSMA report also noted that high levels of taxation can also have an impact on the affordability of devices and mobile services.
It pointed out that the existing rate of import tax on mobile phone devices, at 25 per cent, is encouraging the import of devices through illegal channels in the country.
The study observed that ultimate price of such high taxation is falling upon the grassroots people as it noted that "people in lower income groups finding it more difficult to access mobile internet services".
"For the bottom 20 per cent of the population by income, the total cost of mobile ownership as a share of income varies from 3 per cent for a basic basket to 13 per cent for a high basket, and tax as a share of monthly income varies from 0.8 per cent to 2.6 per cent respectively," it said.
The GSMA study findings are quite in line with what the mobile operators have long been complaining about the business ecosystem in the country.
They have often claimed that the high rate of tax for the mobile operators as well as lofty licence and spectrum fee put additional pressure on their investment capacity. In addition, they blame inadequate spectrum allocation as major barriers for offering better quality services.
Mobile phone is the medium through which most of the people in the country access internet and other digital services-General Secretary of the Association of Mobile Telecom Operators of Bangladesh TIM Nurul Kabir told the FE earlier.
Therefore, the government should think of waiving all prevailing tax and VAT on internet and Smartphone, he said.
When asked on the issue of spectrum allocation, Chairman of Bangladesh Telecom Regulatory Commission Shahjahan Mahmood affirmed that inadequate spectrum is a major reason why the telecom service is not up to the mark in the country.
"Since taking the office, I have asked the telecom operators several times to buy additional spectrums," the BTRC chairman told the FE.
He expressed the hope that problem will be partly resolved through the upcoming auctioning of 4G spectrum.
However, the BTRC chairman was not convinced that the tax rate is that much high in Bangladesh.
"Tax rate for the mobile operators tends to be high in most countries," Mr Mahmood said.
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