Bangladesh Finance Minister M. Saifur Rahman has suggested a new cess on mobile phone connections, but cell phone companies say it will stifle their booming business.

The minister in his budget proposal placed in parliament Thursday proposed a tax cut on handsets from $24 to $4.5 at the import stage, but he put a levy of $19 on every connection.

"I propose a rationalisation of the duty structure as the demand for mobile phones has been growing steadily in the past few years," said Rahman.

"Regardless of its import value, I propose a duty of Taka 300 per mobile set at the import stage and Taka 1,200 for the connection of each SIM card or similar technology at the local stage."

Mobile phone operators fear the new tax will impede the burgeoning mobile phone sector, which has witnessed over a hundred percent growth in the last couple of years.

"Any increase in tax on connection will increase the start-up cost of mobiles and this will limit people's affordability, especially for those who have limited purchasing ability," Syed Yamin Bakht, general manager of GrameenPhone, the largest telecom operator in Bangladesh, told IANS Friday.

He said it would obviously hamper the speedy growth of mobile phone business in the country.

Industry insiders said the move would choke the growth of mobile phone users as the five mobile operators planned to invest heavily in infrastructure and network to raise the number of mobile phone users to about 10 million by yearend.

"Rather the government should encourage the sector to grow faster as it would get more revenues through value added tax on airtime charges if there are more customers," said a top executive of AkTel.

He said the SIM card tax would increase the cost of a connection from Taka 300 to around Taka 1,800 or more.

Bangladesh, with a population of 140 million, has 5.4 million cellular phone users and five mobile operators.

Egypt-based Orascom Telecom bought mobile phone operator Banglalink this year and said its subscriber base was likely total one million by the end of the year.

"Less than four months on, Banglalink's subscriber base has skyrocketed to over 400,000 and growing," Banglalink CEO Lars Reichelt said recently.

Orascom, which launched Banglalink in February after acquiring the country's tiny operator Sheba Telecom, had planned to invest $180 million in 2005 to increase its network.

The Pacific Bangladesh Telecom Ltd. (PBTL) with its new investor Singapore Telecommunications Ltd. (SingTel) planned to spend a further $150 million to boost its subscriber base.

SingTel, Southeast Asia's largest mobile phone company, bought a 45 percent stake in PBTL for $118 million in May.

Bangladesh's largest mobile phone operator is GrameenPhone Ltd, which is majority-owned by Norway's Telenor. It has a market share of about 62 percent.

Telekom Malaysia International Bangladesh has a 26 percent market share, while PBTL has 6.7 percent and state-owned Teletalk Bangladesh Limited, launched in late March, has 40,000 subscribers.