Legal and ethical concerns surround Ncell share ownership transfer

KATHMANDU: In a recent revelation, it has come to light that a significant 80 percent of Ncell’s shares were traded without due notification to pertinent government bodies in Nepal. Government agencies directly associated with the telecommunication service provider and foreign investment, such as the Nepal Telecommunication Authority (NTA), the Office of the Investment Board, the Industry and Investment Promotion Board, and the Office of the Company Registrar, reportedly received no official information regarding the sell and purchase agreement of the Ncell’s share ownership.

Despite official announcements by the Ncell, the seller Axiata, and the buyer Spectrlite UK , confirming the completion of the transaction, the NTA has raised concerns. They have addressed a letter to Ncell Axiata, seeking an explanation for a process that allegedly proceeded without necessary pre-approval, while other regulatory bodies, including those overseeing Foreign Direct Investment (FDI), remain silent.

Experts in the telecommunications sector have also questioned the legality and ethics of the Ncell share ownership sell and purchase agreement. Following the announcement of the sale process, the authority swiftly inquired about its legality and requested clarification from Ncell. Axiata responded the next day, stating that a sell and purchase agreement had been reached with Spectrlite, a registered UK-based company.

Purushottam Khanal, Chairman of the NTA, expressed confidence in Ncell’s adherence to the law, emphasizing the need for pre-approval according to telecommunications regulations. Rule 15 of the Telecommunications Regulations-1997 mandates approval from the authority before selling shares exceeding 5 percent of the paid-up capital.

However, there is a provision allowing Ncell Axiata a one-month window to notify the Department of Industry about the share purchase and sale, notwithstanding the requirement under the Foreign Investment and Technology Transfer Act-2019 for such share transfer notifications.

Moreover, questions have emerged regarding Spectralite selling at a one-third lower price than the acquisition cost, stirring public discussions on social media. Observers believe that Ncell, as a responsible company, should not have proceeded contrary to the country’s laws. There are concerns about potential loss of income, including taxes, and the belief that the sale at a lower price might be an attempt to minimize capital gains tax.

Just two months ago, Spectralite UK- a one dollar comppany, registered in the UK, acquired 80 percent of Ncell’s shares. The company, registered on September 26 in the name of Satish Lal Acharya, a Singaporean of Nepali origin, remains unreported to Nepalese government agencies.

In a statement issued by Axiata, it was revealed that the company, including Acharya, purchased shares for 50 million US dollars. Axiata had previously acquired the same 80 percent share in 2015 for 1.36 billion US dollars. Reynolds Holding Company, registered in a tax haven, has been involved in changing ownership through buying and selling.