KATHMANDU: Axiata, the Malaysian telecommunications company, has made the strategic decision to divest from its Nepal-based business, Ncell, leading to financial challenges for the company in the first three quarters.
Axiata CEO Vivek Sood cited the growing difficulties in Nepal, including high inflation, slow economic growth, and a series of corruption scandals, as key reasons for the exit.
In response to the challenging market conditions, Axiata has reclassified Ncell as an asset held for sale. The company disclosed significant financial implications, with a write-down of $258 million attributed to Ncell’s asset impairment.
Additionally, Axiata wrote off another $68 million in receivables, contributing to the company’s overall net loss of $279 million in the third quarter. Despite a 9% increase in revenue to $3.7 billion, the financial impact from Ncell resulted in Axiata’s unfavorable financial performance.
Excluding the Ncell-related writedowns and other one-off items, such as a $67 million forex loss, Axiata reported a net income of $54 million. The company’s earnings before interest, taxes, depreciation and amortization also saw a positive trend, increasing by 15% to $1.7 billion.
Axiata highlighted that Ncell’s net profit experienced a significant decline of 48% over the three quarters, attributed to higher finance costs and a 6% reduction in revenue. This decrease was driven by lower interconnect rates and a decline in mobile voice usage.
The Malaysian company has not disclosed the prospective buyer for its stake in Ncell. According to certain reports, there is speculation that its minority shareholder, Sunivera Capital Ventures, owned by Satish Lal Acharya, might consider acquiring the stake.
Ncell representatives opted not to comment on the matter, deferring to the statements made by the parent company.
However, this development raises concerns about the viability of investment opportunities in Nepal. It occurs at a time when the Nepalese government is actively preparing to organize an investment summit in April 2024 aimed at drawing foreign capital into the country.
Ncell has been a key player in Nepal’s telecommunications sector. Nevertheless, the operator has witnessed a reduction in its market share recently, primarily attributed to a decline in user numbers.