The board of directors of Teletalk Bangladesh Limited on Tuesday approved a Tk 550 crore network expansion project aimed at acquiring 18 lakh more subscribers by the end of 2008. ‘We have approved the proposal for widening Teletalk’s network and coverage to grab more subscribers,’ said Mizanur Rahman, a joint secretary of the posts and telecommunications ministry who is on the board of the state-owned mobile phone operator.

Teletalk, a minnow among the country’s six mobile phone operators, sent the network expansion proposal to its 11-member board for approval two months ago to stay competitive in the market.

According to the proposal, the state-owned operator, which at present has around 10 lakh subscribers, will mobilise the fund required for the expansion through syndicated bank loans and floating an initial public offering on the capital market.

Since the launch of its commercial service in March 2005 amid much fanfare, Teletalk has failed to expand its network and coverage substantially to cannibalise the market share of its rival operators because of financial constraints.

The company so far has invested around Tk 800 crore to spread its network and coverage to all the districts except the three hill districts.

The Teletalk managing director on November 5 told New Age that a massive expansion was needed to survive in the country’s highly competitive mobile market, which posted more than cent per cent growth over the past few years as the call rates and connection charges had dropped by around 80 per cent since 2004 amid a cutthroat competition, despite some regulatory hurdles such as the imposition of Tk 800 tax on the sale of every SIM card.

To raise the money required for the network expansion, Teletalk a few months ago requested the government to waive the tax on its SIM cards, saying that it was losing business to private mobile operators as the tax had pushed up the cost of its mobile phone connection.

The finance ministry, however, is yet to respond to the proposal to avoid revenue loss and disturbing the level-playing field.

The government in fiscal year 2005-06 imposed a tax of Tk 900 on the sale of every SIM card but reduced it to Tk 800 in the next fiscal.

Though the SIM tax is supposed to be paid by the buyer of a connection, all the operators including Teletalk have been providing the tax from their own coffers as subsidy while selling new connections in order to expand their client base.

The subsidy put a strain on the income of the government-owned company as it has to deposit the SIM tax with the exchequer from its own fund.

Presently, the number of mobile phone subscribers in the country is to the tune of 32 million and is expected to rise to around 50 million by the end of 2009.