NTA accused of favoritism: Ncell’s license renewal uncertain amid UTL revival efforts

KATHMANDU: The Nepal Telecommunications Authority (NTA) has been accused of obstructing the license renewal of the country’s only private telecom operator, Ncell, in what appears to be a strategy linked to the interests of United Telecom Limited (UTL), a defunct company. This uncooperative stance by the regulatory body has sparked significant concern among industry observers, who believe it could have severe consequences for Nepal’s foreign direct investment (FDI) climate and the broader business environment.

On May 8, 2024, the NTA issued a public notice to UTL, demanding that the company pay nearly NPR 7.5 billion in outstanding dues within 15 days or face license cancellation. UTL, unable to meet this demand, requested an extension and proposed paying NPR 200 million upfront, with the remainder to be paid in installments. The NTA, however, has made no legal move to accommodate these demands. Despite this, the regulator has yet to cancel UTL’s license, even though 57 days have passed since the notice period expired.

NTA’s Selective Inaction

NTA’s apparent selective inaction raises serious questions. While UTL continues to operate without paying its dues, Ncell, which contributes billions in revenue to the government and serves millions of customers, faces uncertainty regarding its license renewal. Ncell’s license is set to expire on August 31, 2024, and failure to renew it could lead to automatic cancellation.

Sources within the NTA suggest that the delay in addressing UTL’s dues and the uncertainty surrounding Ncell’s renewal are connected. Chairman Bhupendra Bhandari, who has been accused of stalling the cancellation of UTL’s license, is also delaying a decision on Ncell’s renewal. This has fueled speculation that Bhandari’s actions are motivated by a desire to revive UTL at Ncell’s expense.

The Revival of UTL: A Strategic Maneuver?

UTL, a company with significant foreign ownership, including India’s Mahanagar Telephone Nigam Limited, Telecommunications Consultants India Limited, and Tata Communications Limited, has been inactive for over a decade. However, since Bhupendra Bhandari took over as NTA Chairman, there has been a concerted effort to revive the company. Raj Bahadur Singh, who owns 20% of UTL and is closely connected to former King Gyanendra Shah, has reportedly been meeting with vendors and investors to discuss UTL’s revival.

The revival of UTL appears to be part of a broader strategy to reduce competition in the telecom sector. If Ncell’s license is not renewed, Nepal Telecom would effectively become the sole player in the market, a scenario that could significantly diminish the country’s telecom infrastructure and service quality. NTA officials claim that this strategy is linked to the establishment of a separate telecom infrastructure company, which would act as a front to revive UTL.

Ncell’s Struggles for Renewal

Ncell has been actively trying to renew its mobile license, having already paid NPR 4 billion of the NPR 20 billion renewal fee. The company has proposed paying the remaining NPR 16 billion in installments, but the NTA has refused to consider this option. Instead, the regulator has demanded immediate payment, citing a shortfall in the renewal fee.

This stance contrasts sharply with the treatment of Nepal Telecom, which was allowed to pay its renewal fees over five years without interest. In 2019, when Nepal Telecom’s license expired, the government renewed it by charging NPR 189 million upfront, with the remaining NPR 19.81 billion paid in May 2024. The waiver on interest granted to Nepal Telecom highlights a clear double standard in the regulatory body’s approach to license renewals.

Ncell now faces the daunting task of paying NPR 19 billion, including a NPR 3 billion penalty, to renew its license before the August 31, 2024 deadline. Failure to do so could result in the cancellation of its license, a move that would have severe repercussions for the company and its millions of customers.

Impact on Nepal’s FDI Climate

The NTA’s handling of Ncell’s license renewal is not just a regulatory issue; it has broader implications for Nepal’s FDI climate. Ncell is a major foreign investment in Nepal, and its potential collapse would send a negative signal to international investors. The government’s failure to ensure a level playing field for all telecom operators, coupled with the NTA’s apparent favoritism towards UTL, could deter future investment in the country.

Moreover, the uncertainty surrounding Ncell’s renewal has already caused concern among investors. Axiata Group Berhad, the Malaysian company that previously owned 80% of Ncell, has sold its stake to Spectralite UK, a British company owned by Sunivera Venture Capital.

However, the NTA has refused to recognize this share transfer, further complicating the situation. Under local law, Axiata still holds 80% of Ncell’s shares, but the company has ceased operations in Nepal, leaving Ncell in a legal and operational limbo.

The NTA’s uncooperative stance on Ncell’s license renewal is a critical issue that could have far-reaching consequences for Nepal’s telecom sector and investment climate. The regulator’s selective inaction and apparent bias towards UTL raise serious questions about the fairness and transparency of Nepal’s regulatory framework.

If Ncell’s license is not renewed, it will not only harm the company and its customers but also undermine investor confidence in Nepal. The government must act swiftly to ensure a fair and transparent renewal process, free from vested interests, to safeguard the country’s economic future.

The situation demands urgent attention from both the NTA and the Government of Nepal. If Ncell’s license is allowed to lapse, it will be a significant setback for Nepal’s telecom sector, with long-term implications for the country’s business environment and its attractiveness to foreign investors.

The NTA’s role as a regulator is to ensure fair competition and a level playing field, not to favor one company over another. In this context, the authority’s actions, or lack thereof, regarding Ncell’s license renewal are deeply concerning and warrant immediate scrutiny.