Standoff in Dhaka: Will auctions move ahead in May or not?

Standoff in Dhaka: Will auctions move ahead in May?

16 APR 2015

NEW BLOG: Bangladesh’s spectrum auctions, scheduled for 20 May, look like they will be delayed after the operators made it clear they won’t participate in the sale until a settlement is reached on a controversial fine imposed on them for not collecting tax on SIM replacements.

The finance minister dug his heels in the ground in a meeting last week and won’t budge from a reduced $310 million penalty, which four operators — GrameenPhone, Banglalink, Robi and Airtel – have complained is arbitrary and based on an unrepresentative sample of shops where the government conducted random checks. Insiders say just five retail outlets were “inspected”.

The issue dates back to 2012 when the National Board of Revenue (NBR) slapped a BDT30.11 billion ($381 million) fine on the operators, despite a committee with representatives from the NBR, the telecoms regulator and the operators recommending a fine of just BDT6 billion. Market leader GrameenPhone alone was fined BDT15.80 billion for dodging the tax.

(The operators last June called for the government to eliminate the BDT100 flat tax on SIM replacements, since they already pay the government BDT300 for each SIM card they sell.)

The finance ministry, after on and off negotiations over the past three years, has since proposed lowering the fine to BDT20.48 billion ($310 million) and not charging interest. The ministry’s flexibility, however, is limited by an incentive that gives the person filing the original claim of non-payment of the SIM tax between 2009 and 2011 a staggering 10 per cent of the total fine, so there is little motivation to compromise.

In addition, a huge government budget deficit (BDT772 billion from July to February) makes the finance ministry eager to push to collect the full outstanding amount.

Early last month the four operators sent a joint letter to the minister insisting that the resolution of the issue is a condition for their participation in the 2G and 3G auction, which was called hastily by the government, in what many say is another attempt to boost the government’s coffers.

The Bangladesh Telecommunication Regulatory Commission (BTRC) expects to generate about BDT50 billion ($631 million) from selling off 10.6MHz of 1.8GHz spectrum and 15MHz of 2.1GHz airwaves.

Industry sources told Mobile World Live that while the operators are likely to submit applications for the auction by today (16 April), the real test will be if they pony up the required deposits by 12 May.

All parties are currently negotiating a face-saving way out, and the government is insisting the auctions will go ahead as scheduled, but the operators say they won’t participate.

It will be interesting to see who is the first to blink.

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.


Joseph Waring

Joseph Waring joins Mobile World Live as the Asia editor for its new Asia channel. Before joining the GSMA, Joseph was group editor for Telecom Asia for more than ten years. In addition to writing features, news and blogs, he...

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