The Tanzanian unit of South Africa's Vodacom plans to invest $124 million to expand its network this year but said rising taxes could stifle the sector.

Rene Meza, the managing director of the largest mobile phone operator in Tanzania, said on Wednesday he expects more growth in subscriber numbers this year despite stiff competition.

"This year will see us invest over $124 million in network expansion, data and M-Pesa (mobile phone cash transfer service)," the Vodacom Tanzania managing director told Reuters.

Telecommunications is the fastest-growing sector in east Africa's second-biggest economy and the government is keen to get a higher share of revenue from it.

But mobile phone operators say the government's introduction of a new tax of $0.62 per month on every SIM card and an excise duty of 0.15% on money transfers could hurt investment.

They argue the SIM card tax will delay expansion of mobile phone use among the poor majority in rural areas - around 23 million Tanzanians do not use mobile services.

The tax was introduced from the start of July this year but the president ordered its enforcement to be frozen pending a review after a public outcry.

"The mobile industry in Tanzania is already heavily taxed. Additional taxes will definitely discourage investment particularly for rural expansion," Meza said.

The nation of 45 million people has a mobile penetration rate of 48%, or about 22 million subscribers, according to the Mobile Operators Association of Tanzania (MOAT).

Vodacom Tanzania had about 9.7 million users by June. Other mobile operators in the country include Airtel Tanzania, the local subsidiary of India's Bharti Airtel Tigo Tanzania, a unit of Millicom International Cellular and Zantel, part of the UAE's Etisalat.