KATHMANDU: Telecommunication company Ncell appears to be in a state of limbo, seemingly without a clear owner.
It has been a year since the Malaysian company Axiata Group, which held an 80 percent stake in Ncell, announced the sale of its shares to Satish Lal Acharya’s company, SpectraLite UK Limited.
Following the announcement in November of the previous year, Axiata Group and Acharya’s company formalized the transaction with a bilateral agreement.
However, Nepal has yet to provide updates on the offshore trading or the pricing of Ncell’s shares.
An investigation committee, appointed by the government to examine the legitimacy of the share transaction, has completed its report.
Despite this, the government has not yet made the report public or taken any action based on its findings.
With only 20 days remaining until Ncell’s five-year license expires, the company has yet to pay the necessary renewal fees to the government.
Additionally, numerous legal cases involving Ncell are currently pending in court.
The report also notes that an application for share updates was submitted to the Industry Department on January 13 without notifying the regulatory body.
The key questions now are: Will Ncell’s license be renewed? Will the government recognize the recent changes in ownership of Ncell’s shares?
When will the court resolve the pending cases related to Ncell? And will the government act on the findings of the investigation report?
These uncertainties pose a significant question mark over Ncell’s future.
Is there an update on buying and selling of shares?
Spice Nepal Pvt. Ltd., established to operate mobile services in Nepal on June 21, 2001, has undergone multiple transactions.
On December 1, 2023, Axiata Group, which held an 80 percent stake in Ncell, announced that it had sold its entire shareholding.
Axiata sold 100 percent of its Ncell shares, previously held through Reynolds Holdings in St. Kitts and Nevis—a tax haven—to SpectraLite UK Limited, a company owned by Singaporean Satish Lal Acharya.
According to the financial statement for the fiscal year 079/80, Axiata sold its 80 percent stake in Ncell for 6.5 billion rupees, realizing a profit after tax of 4.25 billion 44 million rupees.
The payment for this transaction is scheduled to be made in installments until December 29, 2029.
Additionally, the agreement between the two companies includes a provision for a percentage of Ncell’s annual profit to be paid to Axiata until 2029.
Notably, Axiata had acquired these shares from Sweden’s TeliaSonera seven years ago for 1 billion 44 billion 78 billion 25 million rupees.
Under the Telecommunication Policy, 2060, foreign investment in Nepal’s telecommunications sector must include at least 20 percent Nepali participation.
Spice Nepal Pvt. Ltd., registered with the Department of Industry, initially had a 60 percent foreign and 40 percent domestic ownership structure.
Section 25 of the Telecommunications Act stipulates that a telecommunications service license can be valid for up to 25 years.
Furthermore, Section 33 of the same Act states that if a company has more than 50 percent foreign ownership at the end of the license period, it will be owned by the Nepalese government.
According to Sub-section 2 of Section 33 of the Telecommunications Act, 2053, the property owned by the Government of Nepal can be operated by a person who previously held a license, provided they pay the prescribed price and obtain a new license.
The inquiry committee’s report, specifically on page 69, suggests that the unusually low price set for Ncell’s most recent share transactions may be related to ongoing concerns.
Following Satish Lal Acharya’s acquisition of shares from Axiata, control of Ncell’s shares has shifted primarily to his family.
Currently, only 11 shares remain outside his family’s control. Prior to Axiata’s departure, 80 percent of Ncell’s shares were held by Axiata Group, while the remaining 20 percent were owned by Sunivera Capital Ventures Pvt. Ltd., a company controlled by Bhawana Singh Shrestha, Satish Lal’s wife.
Ncell’s share transactions have previously been marred by controversies related to share trading, capital gains tax, and frequency fees.
The recent share dealings, occurring just five years before the company is due to come under government ownership, have further intensified suspicions.
Given that Satish Lal is a foreign national and his wife is a Nepali citizen, there is growing concern about whether Ncell’s ownership will revert to government control after five years, considering the entire ownership is currently held by the couple.
Under significant pressure, the investigation committee, led by former Auditor General Tankamani Sharma and formed by the government has highlighted several critical issues regarding the latest share transactions involving Ncell Axiata Limited.
The report identifies 13 criteria and 4 methods for assessing the commercial value of a telecommunications service company and confirms that Ncell’s share transactions are irregular.
If this is the case, Ncell will be required to pay the full renewal fee, including an additional 15 percent fee as stipulated in Section 12 (2) of the Telecommunications Regulations.
Page 74 of the report highlights that Ncell Aziata failed to adhere to legal requirements, including those related to ownership transfer and other regulatory aspects.
It appears that Ncell Axiata Limited did not follow the procedures outlined in the Telecommunications Act, 2053, Section 15 of the Telecommunications Regulations, 2054, or the Regulations on Share Purchase and Sale of Licensed Persons, 2076.
The report also notes that an application for share updates was submitted to the Industry Department on January 13 without notifying the regulatory body.
Additionally, the research report highlights non-compliance with legal requirements in Ncell’s share trading and raises concerns about the buyer’s purchasing power and the potential use of offshore transactions due to low billing.
Based on this report, a Cabinet meeting, under then Prime Minister Pushpa Kamal Dahal ‘Prachanda’, decided not to accept the agreement between Axiata Group and SpectraLite as it stood.
The same meeting also resolved to initiate regulatory actions against the share transactions conducted without prior approval.
The House of Representatives State Law and Governance Committee earlier directed the government and relevant ministries not to approve or consent to any of Ncell’s share transactions until the investigation committee’s report is received.
The Supreme Court is currently considering a case filed by MP Amaresh Kumar Singh, challenging the recognition of Ncell’s latest share transaction.
Additionally, despite a decision by the Council of Ministers on February 6, the government led by KP Sharma Oli has yet to make any further decisions on the matter.
The Department of Industry reported that Ncell Axiata’s application to update the share purchase and sale details has stalled for an extended period.
An official from the Department, speaking with Khabarhub, indicated that the department is awaiting a government decision on updating Ncell’s shares.
The official noted that, given Ncell’s request for application implementation, the department is preparing to formally inquire with the ministry about the next steps.
“The Ncell issue is very significant and complex,” said the official. “We have not made any decision yet, and we are now preparing to write to the ministry about what to do.”
There was no indication of when this letter might be sent.
The Nepal Telecommunications Authority, the sector’s regulatory body, has also instructed the Department of Industry and the Office of the Registrar of Companies not to update the latest share transactions for Ncell without its approval.
Thus, the updating process is expected to remain on hold until a special decision from the Council of Ministers or a court order is issued regarding Ncell’s controversial share transaction.
Does the Government Provide Installment Facilities for Renewal?
Spice Nepal Pvt. Ltd. was granted a license to operate cellular mobile services starting August 16, 2004. Under Section 25 of the Telecommunications Act, 2053, a company can obtain a 25-year license, renewable every five years.
To renew its license, Ncell must pay a fee of 20 billion rupees every five years. The renewal period for Ncell’s last five years of operation is set to end on August 15.
According to Section 12 of the Telecommunications Regulations, 2054, Ncell should have submitted its renewal application along with the requisite fee to the Nepal Telecommunications Authority at least three months before the license expired.
Ncell has instead requested to pay the total renewal fee of 20 billion rupees in installments, amounting to 4 billion rupees per installment.
As there is no legal provision for installment payments, the authority has not made a decision on this request.
The previous government under Prime Minister Pushpa Kamal Dahal ‘Prachanda’ did not address this issue, and the current government led by KP Sharma Oli has also yet to make a decision.
The report suggests that Acharya may not have the capability to acquire Ncell’s shares and recommends investigating his wife for potential offshore transactions and tax evasion.
Government Spokesperson and Minister of Information Technology and Communications, Prithvisubba Gurung, stated that the standard fee for renewing communication service providers is 20 billion rupees and emphasized that installment payments are unconventional.
At a recent program, he announced plans to end the practice of installment payments for Ncell.
Gurung remarked, “Nepal Telecom and Ncell will need 20 billion rupees for five years if they are allowed to renew. The practice of paying 20 billion rupees in eight installments should end. If renewal fees are paid in installments, it reduces the scope for bribery and manipulation. Even though it feels like standing in a fire pit, I will work to uphold the law.”
Minister Gurung’s statement suggests that the government is unlikely to grant installment facilities for Ncell’s license renewal.
If this is the case, Ncell will be required to pay the full renewal fee, including an additional 15 percent fee as stipulated in Section 12 (2) of the Telecommunications Regulations.
If Ncell fails to pay the renewal fee by August 31, 2924 or does not pay the renewal fee with the additional 15 percent, the company’s license will be automatically revoked in accordance with Section 25 of the Telecommunications Act, 2053, and Rule 12 of the Telecommunications Regulations.
Will the Government Implement the Report?
After significant scrutiny and controversy surrounding Ncell’s share transactions, particularly the extremely low prices and offshore dealings, the inquiry committee led by former Auditor General Tankamani Sharma submitted its report to the government on August 31.
Currently, numerous cases related to Ncell are pending in court. The report highlights that Ncell faces about 85 liability claims concerning capital gains tax, tax obligations, and frequency fees.
The comprehensive report, which examined Nepal’s telecommunications sector, Ncell’s share trading history, and related legal cases, uncovered several controversial issues.
It specifically raised concerns about Satish Lal Acharya’s ability to purchase and manage Ncell after acquiring shares from Axiata Group.
Khatri told Khabarhub, “Since the top political leaders are directly involved, they might prevent the government from acting on the report. It remains to be seen whether necessary actions will be taken or if it will be sidelined.”
The report also brought to light Acharya’s opaque connections with the leadership of Nepal’s major political parties.
Former Prime Minister Pushpa Kamal Dahal ‘Prachanda’ mentioned in a Parliament meeting that he, Sher Bahadur Deuba, and KP Oli had all visited Acharya in Singapore, suggesting that personal connections could influence regulatory decisions.
Despite these revelations, the Pushpa Kamal Dahal-led government did not make the report public or take formal action.
The current government, formed by the Congress-UML coalition, has similarly not provided any official stance on the report.
Furthermore, the report has not been shared with parliamentary committees that previously discussed the issue.
The report suggests that Acharya may not have the capability to acquire Ncell’s shares and recommends investigating his wife for potential offshore transactions and tax evasion.
Given these findings, there is speculation that the government might act on the report, particularly given the implications for those seeking control over Nepal’s telecommunications sector through political connections.
Former Acting Auditor General Sukdev Bhattarai Khatri, who has previously challenged capital tax evasion in the TeliaSonera-Ncell transaction, expressed doubts about the report’s implementation.
He suspects that the political involvement of Deuba, Oli, and Prachanda might impede the report’s enforcement.
Khatri told Khabarhub, “Since the top political leaders are directly involved, they might prevent the government from acting on the report. It remains to be seen whether necessary actions will be taken or if it will be sidelined.”
Khatri also noted that the current report, largely the result of efforts by the investigation committee’s secretaries, may face challenges in achieving full implementation.
Also Read:
https://english.khabarhub.com/2024/09/371255/
https://english.khabarhub.com/2024/29/367698/
https://english.khabarhub.com/2024/28/367453/
https://english.khabarhub.com/2024/08/370915/
https://english.khabarhub.com/2024/26/367221/
https://english.khabarhub.com/2024/05/368725/
Comment