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18 September, 2017 08:25:51 AM

Govt should reconsider spectrum fees to make 4G affordable

AMTOB general secretary TIM Nurul Kabir tells theindependent
Sharif Ahmed
Govt should reconsider spectrum fees to make 4G affordable
Secretary general of the Association of Mobile Telecom Operators of Bangladesh TIM Nurul Kabir independent photo

Mobile operators are already burdened with some of the highest taxes and high fees that make it challenging for them to roll out sophisticated technology. The high spectrum prices have made it difficult for them to provide 4G services across the country.

The Independent recently interviewed the secretary general of the Association of Mobile Telecom Operators of Bangladesh (AMTOB), TIM Nurul Kabir, to find out the feasibility of having 4G and its business viability along with other issues including SIM replacement, mobile financial services, and tower sharing from the perspective of mobile network operators (MNOs).

Recently, the government has approved the 4G licensing guidelines and spectrum fees. As we know, the operators raised concerns regarding the high spectrum fees, but the government has not paid any heed to such concerns. What is your reaction?

TIM Nurul Kabir: In fact, we had conveyed our concerns regarding the 4G/LTE licensing and spectrum pricing to the government. We hoped that the government would consult MNOs before finalising it. But that did not happen. Since the MNOs are the customers of the spectrum, the demand and the supply sides should have been taken care of.

Now, it will be the business decision of the investors on how they will respond at the upcoming auction. Bangladesh is one of the few countries where the spectrum scarcity of MNOs is very high. It was an opportunity for the government to offer the airwave at a lesser cost to enable MNOs to offer the 4G service to the people at an affordable price and build a better network. High spectrum prices are always an obstacle for a robust roll-out because the service-delivery cost becomes high, making it difficult to offer better services.

If an operator plans to invest Tk. 100 for 4G and spends 70 per cent of the money in purchasing spectrum, how will it invest in an effective roll-out? We request the government to reconsider the spectrum fees.

The technology neutrality fee has been revised from USD 10 million to USD 7.5 mn per Megahertz spectrum conversion. How do you see this?

TIM Nurul Kabir: The current charge for spectrum conversion seems as if I am repurchasing my own spectrum twice, though it has been slightly revised. From the very beginning, we have been saying that there should be no fee for spectrum technology neutrality. When the 3G spectrum was purchased, we were notified that the airwave was technology-neutral, which meant that the spectrum could be used for both 3G and 4G. There are several countries where there is no such conversion fee.

What is the experience of 3G business so far in terms of investments and returns?

TIM Nurul Kabir:  The result is still very negative. 3G was not a successful business case for MNOs in terms of investments and returns. It happened because the spectrum price was too high and the ecosystem was not ready for 3G. The total investment in 3G was USD 4 billion or Tk. 32,000 crore, while the returns so far have only been Tk. 6,000 crore. At the same time, high smartphone penetration is the main driver behind any mobile data business, but such penetration is very poor in Bangladesh—only 27 per cent. Smartphone imports have been affected due to a high import tax.

We have to keep in mind that 4G will also require huge investments and the ecosystem is very important too. Currently, only 4 per cent of the handsets in Bangladesh are 4G-enabled.

What are your suggestions to make the 4G ecosystem prevail in the country?

TIM Nurul Kabir:  I would like to remind you that personal computers (PC) flooded every corner of the country when the government withdrew all types of VAT and taxes on PC imports last decade. And we are still reaping the economic benefits of that initiative. Now, if the same policy is taken for smartphone imports and Internet usage, it can prompt an Internet revolution in the country.

We still have around 46–47 per cent unconnected people and you cannot expect to have a digital society by keeping these people out of connectivity. Digital devices and services have to be made affordable even to marginalised people; otherwise, it will be difficult to meet the government’s digital vision. MNOs always want to be a partner of the government in this journey.

MNOs are now digital service providers and very significant players as the Internet of Things (IoT) and other new services will become an integral part of people’s life. The more we use connectivity and broadband, the more the economy will be boosted.

What about the tax regime of the telecom sector?

TIM Nurul Kabir: The current tax policy is an impediment to the growth of the telecom industry, though this industry pays the maximum amount of tax to the government. Unpredictable and uncertain financial regulations have been the main obstacle to the growth of the industry. When investors encounter uncertainty, they are not encouraged to put money in the market. Currently, MNOs deposit around Tk. 47 as tax from their Tk. 100 revenue earnings. Now, from the rest of the amount, around 30 per cent goes towards network maintenance and meeting other operational costs. In this situation, how will the MNOs make profit in a very capital-intensive industry? That’s why the operators, except one, are unable to make profits here. Sustainability has become a big challenge for them. After investing for five to six years, Airtel merged with Robi. Even the state-owned Teletalk is suffering due to the tax burden. Not only that, when the government is preparing for the 4G service, it has increased the handset import tax and telecom equipment import duty. So, where is the business case?

There is no provision of VAT on spectrums in any country because it is a natural resource and does not fall in the category of "goods or services". VAT is applicable only to goods or services. The BTRC leases the spectrum to MNOs for a certain period of time. However, the BTRC does not have a VAT registration, so it cannot give the amount to the NBR. We hope the government will resolve this problem soon.

So, do you think there has been a drop in foreign direct investment in the country due to financial uncertainty? Are there any other causes?

TIM Nurul Kabir: Yes, of course, it is one of the main causes. Another big issue is that the tax collector itself is also the tax regulator that forms the tax policy. The whole taxation policy should be reviewed, and the tax regulator should be separated from the tax collector. The cost of doing business is very high here; it is not favourable, especially for foreign investors.

As we know there is a tax dispute of around Tk 3,000 crore with the National Board of Revenue (NBR). What is its current status?

TIM Nurul Kabir: In my opinion, the SIM replacement case is a "fictitious" one. You cannot purchase five SIMs of each operator from the market and claim that all the replaced SIMs of the last three years are taxable, as the NBR officials did. It is just not acceptable. Fundamentally, it was a wrong claim. The NBR does not have telecom experts. That’s why before the 3G auction, a committee was formed with representatives from the BTRC, but the tax regulator did not accept their opinion. Of course, MNOs want to pay taxes to the government, but that should not be in the way it is happening now.

Recently, the Large Taxpayers Unit (LTU) of the NBR claimed more than Tk. 800 crore, which is unprofessional. Since all SIMs have been verified through the biometric process, this claim has no justification. This SIM replacement tax has become a challenge for future investment. We hope the government will resolve this dispute in a logical way.

As per the draft guidelines, the operators have to provide 100 Megabites per second speed for 4G service. Is that possible?

TIM Nurul Kabir: It may not be possible to ensure 100 Mbps in all places. I think that such conditions regarding service quality should not be imposed in this way. Rather, the government can ask for a range. If you look at the global standard of 4G, the average speed is 15–16 Mbps. Even the top two countries—Korea and Singapore—which have the best telecom infrastructure cannot provide more than 45 to 46 Mbps of speed.

If the government initiates the spectrum auction under the current circumstances by keeping the tax dispute unresolved, will the operators participate in the auction?

TIM Nurul Kabir: The operators are not going to purchase the spectrum for philanthropy; they want to do business. If I have Tk 100 in my pocket and a liability of Tk 200, how can I invest? The telecom investors will be encouraged to participate in the auction only when the government addresses all the unresolved issues.

We often get complaints that the quality of service has fallen during the past two years. What are the causes behind this?

TIM Nurul Kabir:  In general, it happens when the number of customers increases and amount of spectrum decreases on a global scale. However, in the case of Bangladesh, the services provided by MNOs are dependent on other service providers like the telecom transmission company, interconnection exchanges and international gateways. So, when the services of the other entities are disrupted, obviously the service quality of MNOs is affected as well. Now, the government is going to separate the towers from MNOs, though they play the most vital role for their network and businesses. However, customers always blame  MNOs for quality disruption. It is a collaborative service and not provided by the MNOs alone. A combined effort is required in this regard.

How are the MNOs contributing to the mobile financial service (MFS) since it is an integral part of the financial inc lusion?

TIM Nurul Kabir: The MFS services were offered by the government for financial inclusion, but only 10 per cent of the account holders are using the mobile wallet. The rest get the service through agents. It is not a good sign. However, MFS companies  provide the service with the help of MNOs by using their network. Since the pressure of transaction is increasing exponentially, it is affecting the MNOs’ service quality. You know, the USSD code is used for the service, which is a tiny part of the spectrum used for the voice service. Currently, the operators get a very nominal 7 per cent from the revenue of the MFS, but we want per session charge for the USSD. We are discussing the matter with the government and hopefully will get a positive result.



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Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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