Nepal adjusts telecom regulations amidst concerns over liability and licensing

KATHMANDU: In a swift response to public concerns and criticisms over the ‘Property Management Regulations of Telecommunication Service Providers Without Permits, 079,’ which were introduced just last November, the Nepali government has taken measures to amend these regulations within a year of their implementation. The initial set of rules had faced scrutiny for perceived haste and favoritism towards specific service providers.

Although an attempt was made to address some of these concerns through the ‘asset management regulation of telecommunication service providers whose license is not valid, first amendment of 080,’ published in the gazette last Wednesday, the original regulation continued to draw flak, particularly regarding the government’s obligations towards service providers whose licenses had been revoked.

The revised regulations now explicitly state that the Government of Nepal, its authorities, and other government agencies shall not be held liable for managing the assets of service providers lacking a valid license. The amendment introduces the provision that any liabilities will be covered from the canceled company’s available cash balance.

However, if no cash balance exists, the service provider will be responsible for settling the entire liability. In the previous version, it was mentioned that if a liability couldn’t be met, the assets of such service providers would be auctioned to cover the debt.

The Nepal Telecommunication Authority had taken control of Smart Cell, a private investment telecommunication service provider, under the original regulation because it couldn’t meet various fees, including license renewal costs.

Yet, after acquiring Smart Cell, the authority encountered challenges moving forward with the asset evaluation and frequency allocation process. This involves the formation of a price determination committee, as required by the regulations. Despite repeated calls for applications from April to August, no committee was formed, leaving Smart’s management in limbo.

Questions loom regarding the fate of the payments made by Smart Telecom’s customers and vendors, as well as other outstanding liabilities.

The amendment now dictates that in cases where the movable and immovable assets of companies like Smart Telecom, without a valid license, cannot be auctioned or find no takers, their assets and liabilities will be liquidated according to Section 126 of the Companies Act 063.

While these regulations are named “asset management,” the amendment surprisingly includes provisions more concerned with licensing. It allows other service providers willing to shoulder the liabilities of a canceled company to choose either the previous license or the remaining period of the related service.

This provision has raised concerns, as it could potentially permit private service providers like Ncell, with licenses expiring in August 086, to acquire Smart Telecom, which holds a term of 095 years, thereby extending their own license by 9 years.

Telecommunications industry experts caution that this move may lead to the loss of potential revenue and income for the government of Nepal, as it essentially allows the issuance of old licenses instead of generating revenue from new permits.

Furthermore, the amended regulations remove Rule 35 (a) from the previous version, which had allowed companies whose licenses had expired to buy canceled companies and obtain a new license with a 25-year term. Although this specific provision has been removed, the government appears to still grant licenses with limited remaining periods to buyers of decommissioned companies.

In the revised framework, the government has stipulated that service providers purchasing telecommunication companies with revoked licenses can receive frequencies up to the maximum limit allowed by law.

Previously, it was implied that when companies controlled by the Authority were sold through bidding, the buyer taking on the debts and liabilities of these companies would also acquire all of their frequencies.

The amendment clarifies that upon license cancellation, the frequencies used by the service provider and other telecommunication-related assets will automatically transfer to the ownership of the Government of Nepal.