Zambia's only mobile phone manufacturing company, M-mobile Telecommunications (M-Tech), is on the brink of closure as it faces growing competition from China.

The increasing number of imported and highly subsidized mobile phones from China on the Zambian and regional markets is having an impact on the company's growth, according to M-tech Chairman Mohammed Seedat. If the Zambian government does not urgently come up with policies to deal with the Chinese subsidized competition, M-Yech faces closure, Seedat said.

The US$10 million mobile assembling was set up in 2009 to provide affordable mobile phones in Zambia as well countries in the region including Zimbabwe, Burundi, Kenya and Tanzania. The initial plan of the company was to be assembling 1,000 handsets per day, but since 2009, the company has only been able to produce 12,000 single- and dual-SIM phones, due to low sales.

The M-Tech line of handsets made in Zambia have, among other features, FM radios, phone books, color screens, alarms and calendars. They are currently being sold between $40 to $45.

"Plans to export mobile phones to countries within the Southern African region have been put on hold because like Zambia, these countries have not been spared from the influx of heavily subsidized mobile phones," Seedat told journalists in Lusaka, Zambia last week.

The Zambian government should introduce a system to register all phones coming into the country, Seedat said, claiming most of the handsets were being imported illegally.

In 2009, the Zambian government increased customs duty on foreign manufactured phones to 15 percent from 5 percent in a bid to encourage local production of phones. The local phone assembling company was also exempted from paying tax, a move that was aimed at making the locally manufactured phones cheaper than imported phones.

But Chinese-manufactured phones are selling for as low as $20, while mobile phone operators are selling customized handsets for as low as $12 with free airtime.

The Zambia Information and Communication Technology Authority (ZICTA), the country's telecom sector regulator, has partnered with the Consumer and Competition Protection Commission (CCPC), a local consumer watchdog, to tighten rules on competition in the telecom sector in a bid to save M-Tech.

Telecommunications has contributed to the economic growth of the country, but has also brought about increasing competition and conduct that may require regulating, according to CCPC executive director Chilufya Sampa.