KATHMANDU: The private telecommunication company Ncell, known for its slogan “Ncell for Nepal,” is reputed to contribute significantly to the development of Nepal’s telecom sector while offering affordable services to Nepali citizens.
However, a recent government investigation report has uncovered troubling practices by Ncell, revealing that the company has been systematically defrauding Nepali customers in financial transactions and customer service.
The investigation was initiated in response to allegations of capital gain tax evasion related to the sale of 80 percent of Ncell’s shares by the Malaysian company Axiata to SpectraLite UK.
The report exposes Ncell’s persistent deceptive practices, characterized as an ‘open secret’ in their business operations.
According to the report, Ncell has been illegally defrauding customers of billions of rupees through various schemes.
These include charging customers under misleading headings, misinterpreting or failing to provide proper notice, and engaging in auto-renewal tactics for different packs and applications.
In 2016, when the capital gains tax issue related to the Ncell shares transaction between TeliaSonera and Axiata remained unresolved, there were widespread concerns about potential tax evasion and legal discrepancies due to the undervalued sale of shares.
It appears that these deceptive practices were not isolated incidents but rather a recurring issue.
Despite the gravity of these findings, the Nepal Telecommunication Authority, the regulatory body responsible for overseeing such matters, has only imposed a maximum fine of 500,000 rupees on Ncell.
This has led to criticism that the regulatory response has been insufficient given the scale of the financial misconduct.
How Ncell Defrauded Customers
According to the government investigation report, Ncell systematically defrauded customers by implementing auto-renewal schemes for Value Added Services (VAS) up until May 2020.
Despite a decision by the Nepal Telecommunication Authority (NTA) on May 25, 2020, to impose a fine of 50,000 rupees and end the automatic renewal system, Ncell continued these practices.
The report does not provide detailed data on the total amount collected or the number of affected customers.
Additionally, Ncell enticed customers with recharge and win offers that were not compliant with the Telecommunications Act and regulations.
On November 2, 2018, the NTA instructed Ncell to immediately cease these offers.
Ncell was fined 50,000 rupees on February 17, 2020, for collecting money from customers without adhering to the prescribed tariff rates for internet services.
However, the report does not address whether or how this fine related to specific instances of customer fraud.
The investigation also revealed that Ncell collected approximately 1.5 billion rupees through subscription systems for daily, three-day, weekly, and monthly packs in Game Loft and Huawei App Gallery.
Although the NTA directed Ncell to refund this amount, the report lacks details on whether this directive was effectively implemented.
From the fiscal year 2015/16 to 2018/19, Ncell’s reported profits after tax were 20 billion, 17 billion, 18 billion, and 31 billion rupees, respectively, amid widespread social media complaints about excessive charges.
Meanwhile, the latest government investigation into the share purchase and sale transactions has highlighted, on pages 51, 52, and 53 of the report, that Ncell illegally collected substantial sums of money from customers under various misleading headings.
The investigation pertains to the series of transactions involving the share ownership of Spice Nepal Pvt Ltd, which was established on June 21, 2001, to operate mobile services in Nepal.
On December 1, 2023, the Axiata Group, which previously held an 80% stake in Ncell, announced that it had divested all its shares.
Axiata sold its entire stake in Ncell to Reynolds Holdings, based in St. Kitts and Nevis, which, in turn, was acquired by SpectraLite UK Limited, a company owned by Singaporean Shatishlal Acharya.
According to the fiscal statement for the fiscal year 2022/23, Ncell reported a profit after tax of 4.25 billion 44 million rupees.
Notably, this payment is scheduled to be made in installments until December 29, 2029.
It is worth mentioning that Axiata acquired these shares seven years ago from TeliaSonera of Sweden for 1 billion 44 million 78 thousand 25 rupees.
The report indicates that the regulatory authority has granted Ncell immunity by imposing only minimal fines, despite the large sums of money involved, citing various legal provisions.
The situation sparked significant concern on December 1, 2023, when the Axiata Group announced that it would sell all its shares in Ncell at a notably low price.
This announcement raised doubts among Nepali citizens, media, regulatory bodies, and political circles.
In 2016, when the capital gains tax issue related to the Ncell shares transaction between TeliaSonera and Axiata remained unresolved, there were widespread concerns about potential tax evasion and legal discrepancies due to the undervalued sale of shares.
The mass media made this issue a focal point of public debate.
Additionally, various parliamentary committees, including the Public Accounts Committee, Finance Committee, State Affairs and Good Governance Committee, and Education and Information Technology Committee, began inquiries involving the government, regulatory bodies, and officials.
The Chairman of the Public Accounts Committee, Rishikesh Pokhrel, even sent a written request to the Commission for the Investigation of Abuse of Authority (CIAA) to probe the Ncell share transactions.
Under intense pressure, the government formed a five-member committee led by former Auditor General Tankamani Sharma Dangal.
The committee also included Phanindra Gautam, Secretary of the Government of Nepal; Joint Secretaries Ritesh Kumar Shakya and Baburam Bhandari; and Sujan Kumar Kafle, President of the Nepal Chartered Accountants Association.
The committee completed its investigation and submitted the report to the government. However, the report has yet to be officially released by the government.
The report highlights several key issues regarding Ncell’s illegal share trading and financial misconduct.
Notably, previous news coverage by Khabarhub has reported on the involvement of non-resident Nepali businessman Dr. Upendra Mahato, along with Niraj Govinda Shrestha, Bhawana Singh Shrestha, and Shatishlal Acharya, in these matters.
The report states, “Due to the inability to complete the duties outlined in Section 13 of the Telecommunications Act 2053 effectively and on time, various problems have emerged in the regulation of this sector.”
Pages 51, 52, and 53 of the investigation report address the illegal collection of billions of rupees by Ncell from its millions of customers.
The report indicates that the regulatory authority has granted Ncell immunity by imposing only minimal fines, despite the large sums of money involved, citing various legal provisions.
The report also notes a lack of detailed data on the amount of money illegally collected by Ncell, leaving room for further investigation.
Additionally, the report questions the effectiveness of the Nepal Telecommunication Authority, the regulatory body overseeing Nepal’s telecom sector.
It suggests that the authority has struggled to perform its duties effectively and in a timely manner, which has led to regulatory problems in the sector.
The report states, “Due to the inability to complete the duties outlined in Section 13 of the Telecommunications Act 2053 effectively and on time, various problems have emerged in the regulation of this sector.”
It also recommends that more research and investigation into Ncell’s practices be conducted.
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