Government opens path for license renewal as 25-year limit approaches for major telecom service providers

KATHMANDU:  The government has recently taken steps to resolve longstanding regulatory uncertainties about renewing telecommunications licenses, providing clarity to service providers operating in Nepal for over 25 years. The amendments to the Telecommunications Regulations, 2054 BS (1997 AD), now pave the way for companies to apply for license renewals, provided they meet the necessary conditions, including clearing outstanding royalty fees and contributions to the Rural Telecommunication Development Fund (RTDF).

For years, Nepal’s telecommunications sector has been in limbo over how to handle licenses after their initial 25-year period expired. This ambiguity led to uncertainty for telecom operators and raised questions about the continuity of services, particularly as licenses for Nepal’s most prominent providers, such as Nepal Telecom, WorldLink Communications, Mercantile Communications, and Communications and Communicate Nepal, approached their expiration dates.

The Cabinet’s directive, issued on April 10, instructed the Nepal Telecommunications Authority (NTA) to reissue a license for Nepal Telecom’s GSM cellular mobile service for five years, with a renewal fee of NPR 210 million. This action marks the first time that regulatory measures have been taken to explicitly address the license renewal process, setting a precedent for other providers whose licenses have reached or will soon reach their 25-year limit.

Legal Amendments to Address 25-Year Licenses

The government recently introduced the tenth amendment to the Telecommunications Regulations, allowing telecom companies to apply for renewed licenses. The amendment added Rule 7(a) to the existing regulation, which permits operators with expiring 25-year licenses to submit applications for renewal. Although the precise legal framework had long been unclear, this development aims to establish a smoother process for license continuation, provided the necessary financial and operational obligations are met.

In the revised regulation, Sub-Rule 7(a)(1) specifies that telecom operators with up to 50% foreign investment can apply for renewal under Section 33(4) of the Telecommunications Act, 2053 BS (1996 AD), by clearing all dues, including royalty fees and RTDF payments. Companies are required to file their applications in the format outlined by the NTA and clear any outstanding payments. Once these conditions are fulfilled, the NTA can proceed with the issuance of a new license.

What the New Regulations Mean for Major Telecom Providers

With Nepal Telecom being the first company to benefit from this newly clarified policy, other major telecom providers operating in Nepal are now looking to follow suit. Industry observers note that companies such as WorldLink, Mercantile Communications, and others have already surpassed their 25-year licensing terms but have continued operating in Nepal despite lacking a valid license for the past six months. Questions have been raised by industry experts and the public about the government’s tolerance for this, given the critical role these companies play in providing connectivity across the country.

Although the revised regulations now offer a pathway for renewal, certain aspects of the new policy remain ambiguous. In October, the Cabinet approved the tenth amendment to the Telecommunications Regulations, and the updated regulations were subsequently published in the government gazette. However, specific details of the amendment were initially withheld from public view, leaving the telecom sector with a degree of uncertainty.

“We’ve heard that changes have been made, particularly about the 25-year license terms,” said a senior official at the NTA, who preferred to remain anonymous. “However, no official communication has yet reached us from the ministry. We can provide more details about the implications of the amendments once we receive formal information.”

FDI Implications and Concerns

The recent regulatory update also has implications for foreign direct investment (FDI) in Nepal’s telecommunications sector. Sub-Rule 4 of the amended regulation requires service providers to apply for license renewal three months before their current licenses expire, along with the requisite fees. Should they miss this deadline but apply within the license’s valid period, they must provide an explanation and pay a 15% late fee for renewal. Failure to comply with this process would lead to the non-renewal of the license, as stipulated by Sub-Rule 7 of the revised regulation.

The potential impact on foreign-owned entities like Ncell, which has more than 50% foreign ownership, is particularly significant. According to Section 33(4) of the Telecommunications Act, companies exceeding this foreign ownership threshold will come under government ownership upon the expiration of their license. As a result, Ncell’s future operating model in Nepal is under considerable scrutiny, as investors assess the risks associated with the potential for government takeover upon license expiration.

Experts Call for Clearer Guidelines

Industry experts have voiced concerns about the effectiveness of the new regulations in fostering a conducive business environment, especially for companies that rely heavily on foreign investment. They caution that unclear policies may deter future investors from entering the Nepalese market, hindering the telecommunications sector’s growth and development.

“These amendments offer some clarity, but they also introduce new layers of complexity, particularly concerning FDI,” noted telecom analyst. “If the government aims to attract FDI and make Nepal a more competitive market, it’s crucial that policies are clear and consistent. The possibility of government takeover, as in Ncell’s case, could be a major deterrent for foreign investors.”

Looking Forward

The government’s recent actions signal a willingness to address regulatory gaps in Nepal’s telecom industry, but questions remain about whether these measures are sufficient to ensure stability and encourage investment. The NTA has stated that they will provide additional guidance once the ministry formally communicates the amendments, though the telecom industry is already urging swift and decisive clarification on several issues.

For companies like WorldLink, Mercantile Communications, and especially Ncell, the stakes are high. As the industry waits for the government’s final guidance, telecom providers and foreign investors alike will be closely watching how these amendments are implemented, hoping for a clearer, more transparent regulatory landscape that supports both local and foreign investment in Nepal’s telecommunications future.