Thursday, October 10th, 2024

Ncell: License renewal conditional on full tax payment and share transaction restrictions


08 August 2024  

Time taken to read : 9 Minute


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KATHMANDU: The telecommunications company Ncell faces a crucial deadline as its license is set to expire on August 31, 2024.

Ncell, which missed the May 28 deadline for the renewal fee payment, must now pay the prescribed fee plus a penalty by August 31.

Under Section 25 of the Telecommunication Act, 2053, and Rule 12 of the Telecommunication Regulations, Ncell is required to pay an additional 15 percent penalty on the renewal fee.

Having paid only 4 billion rupees towards the renewal fee on May 28, Ncell now owes more than 19 billion rupees including the fine.

The renewal process, according to law and regulations, can proceed after the payment of fines.

However, the committee investigating Ncell’s case has recommended that the license be renewed only under several additional conditions.

These conditions include addressing Ncell’s alleged tax evasion on share transactions, unpaid frequency duties, and ongoing income tax disputes.

The investigation committee has advised the government that the license renewal should be contingent upon Ncell settling all outstanding taxes.

Additionally, Ncell’s ownership must be transferred to the Government of Nepal by 2086 BS.

The committee has also highlighted that over 85 billion rupees in liabilities associated with Ncell are pending in various courts.

The inquiry committee’s report suggests that the government may impose new conditions on Ncell as part of the renewal process, as detailed on pages 87 and 88 of the report.

Conditions for Ncell’s License Renewal

The report states, “While renewing the license for the past five years, and in accordance with Section 33 of the Telecommunications Act, 2053—which stipulates that the company will automatically come under the ownership of the Government of Nepal upon the expiry of the license period—additional conditions may be imposed.”

The committee has proposed 13 new conditions to the government, including requirements that “taxes and other revenues and obligations to be paid to the Nepal government must be settled,” and that “dividends cannot be declared or paid without settling government taxes and other dues to the Nepal government and the Nepal Telecommunication Authority.”

On December 1, 2023, Axiata Group, which held 80 percent of Ncell’s shares, announced the sale of its entire stake through a series of transactions.

It is also recommended that, during the final renewal process, Ncell should have two directors with expertise in public company operations and provide a commitment to transfer a company with zero liabilities to the government by August 2086.

Axiata sold 100 percent of its Ncell shares to Reynolds Holdings, based in St. Kitts and Nevis, which then transferred the shares to SpectraLite UK Limited, a company owned by Singaporean Satish Lal Acharya.

Following this transaction, Satish Lal’s family now controls all but 11 shares of Ncell.

Previously, Axiata Group owned 80 percent of Ncell through Axiata Pvt Ltd, with the remaining 20 percent held by Sunivera Capital Ventures Pvt Ltd, a company owned by Satish Lal’s wife, Bhawana Singh Shrestha.

The investigation committee has recommended that when renewing Ncell’s license, the ownership structure should not shift to 80 percent foreign ownership and 20 percent Nepali ownership.

The committee insists that until the ownership is fully transferred to the Government of Nepal in August 2029, the investment ratio of 80 percent foreign investors to 20 percent Nepali investors must remain unchanged.

According to page 88 of the investigation committee’s report, this ratio must be maintained until the transfer is complete, as stipulated by Section 33(1) of the Act.

SpectraLite Limited Unfit for Ncell operation

The investigation committee has concluded that Satish Lal Acharya’s offshore company, SpectraLite UK Limited, is unfit to buy and operate Ncell due to deficiencies in financial, technical, and managerial capacities.

The report highlights that, when approving the Ncell share purchase and sale agreement between Axiata Group and Spectralite UK in 2023, it was essential to demonstrate adequate financial, technical, and managerial capabilities.

Page 88 of the committee’s report states, “If the current share purchase and sale agreement is approved, it must be demonstrated that there is sufficient financial, technical, and managerial capacity for the operation.”

Additionally, the report advises the government to implement several measures before renewing Ncell’s license.

These include prohibiting future employee and worker benefits additions and preventing unreasonable increases in international and prevailing telecommunication service fees.

The unpublished report outlines several recommendations for the government concerning Ncell’s license renewal and post-renewal procedures. These include ensuring compliance with financial and tax obligations.

It is also recommended that, during the final renewal process, Ncell should have two directors with expertise in public company operations and provide a commitment to transfer a company with zero liabilities to the government by August 2086.

Ncell’s License Renewal

Ncell, originally established as Spice Nepal Pvt Ltd on June 21, 2001, to provide mobile services in Nepal, has operated under the name Ncell Axiata Pvt Ltd.

It has been a significant player in Nepal’s telecommunication sector, often in the spotlight for share transactions.

On December 1, 2023, Axiata Group Bhd, which previously held 80 percent of Ncell’s shares, announced it had sold its entire stake.

Axiata transferred 100 percent of its Ncell shares to Reynolds Holdings, based in St. Kitts and Nevis, which then sold them 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 for 6.5 billion rupees.

This stake was acquired seven years earlier from Teliasonera of Sweden for 1 billion 44 million 78 thousand 25 rupees.

After the transaction, Satish Lal’s family now controls all but 11 shares of Ncell.

Previously, Axiata Group Bhd held 80 percent of Ncell through Axiata Pvt Ltd, while the remaining 20 percent was owned by Sunivera Capital Ventures Pvt Ltd, a company owned by Satish Lal’s wife, Bhawana Singh Shrestha.

Suspicion Surrounds Ncell’s Share Sale and License Renewal

On December 1, 2023, Axiata Group’s announcement of selling its entire stake in Ncell at a significantly reduced price sparked widespread concern among Nepali citizens, media, regulatory bodies, and political circles.

The transaction has raised questions due to unresolved issues related to capital gains tax from previous share dealings between TeliaSonera and Axiata.

Concerns about potential tax evasion and illegal transactions at undervalued prices have surfaced.

In response to growing public and media pressure, along with inquiries from parliamentary committees, the government formed a five-member investigation committee led by former Auditor General Tankamani Sharma Dangal.

Sources close to the Prime Minister suggest that the current administration is reluctant to intervene in facilitating Ncell’s license renewal amid numerous ongoing court cases and controversies.

The committee also included Fanindra 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 submitted its report to the government. However, the report has not yet been officially released.

The unpublished report outlines several recommendations for the government concerning Ncell’s license renewal and post-renewal procedures. These include ensuring compliance with financial and tax obligations.

According to Santosh Paudel, spokesperson for the Nepal Telecommunication Authority, Ncell paid 4 billion rupees for the license renewal but has not settled any additional amounts.

Ncell has requested an installment payment option for the remaining amount, but there has been no indication from the authorities or the government about accommodating this request.

An Ncell official, speaking to Khabarhub, indicated that the company is waiting for a decision on the installment facility from the government.

Sources close to the Prime Minister suggest that the current administration is reluctant to intervene in facilitating Ncell’s license renewal amid numerous ongoing court cases and controversies.

As a result, the final renewal of Ncell’s license and its future operations remain uncertain and challenging to predict.

Also Read:

https://english.khabarhub.com/2024/05/368725/

https://english.khabarhub.com/2024/01/368124/

https://english.khabarhub.com/2024/29/367698/

https://english.khabarhub.com/2024/28/367453/

https://english.khabarhub.com/2024/26/367221/

https://english.khabarhub.com/2024/17/365794/

https://english.khabarhub.com/2024/12/365112/

https://english.khabarhub.com/2024/03/363785/

https://english.khabarhub.com/2024/29/358429/

Publish Date : 08 August 2024 06:33 AM

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