Ncell, the leading telecommunications provider in Nepal, has been embroiled in a series of controversies and disputes in recent years. These issues have raised questions about the company’s ownership, tax obligations, and adherence to regulations.
The Ownership Saga: Axiata and the Sunivera Mystery
In 2016, Malaysian company Axiata acquired a controlling stake in Ncell for a staggering $1.36 billion. However, the deal was shrouded in controversy from the start.
One major concern was the involvement of a mysterious offshore company called Sunivera Holdings. Sunivera, which owned a 20% stake in Ncell alongside Axiata, was linked to Bhavana Singh Shrestha, wife of Nepal’s former Finance Minister, Bishnu Prasad Poudel. This raised concerns about conflict of interest and potential influence-peddling.
The controversy deepened when an investigation by the Centre for Investigative Journalists Nepal revealed that Axiata had paid $90 million to a secretive offshore company with a link to Bhavana Singh Shrestha just months before Sunivera bought its stake in Ncell. This fueled suspicions about financial impropriety and a possible attempt to circumvent regulations.
The dispute over ownership led to a lengthy legal battle between Axiata and the Nepali government. The government argued that the original sale of Ncell was undervalued and that Axiata owed additional taxes. This resulted in a hefty tax demand of approximately $200 million.
In 2023, Axiata announced its decision to exit Nepal by selling its stake in Ncell to a newly established UK-based firm. This move was seen as an attempt to avoid paying the disputed tax amount, further escalating tensions between the company and the government.
The Tax Dispute: A Tribunal Verdict and Ongoing Challenges
The tax dispute between Axiata and the Nepal government reached the International Centre for Settlement of Investment Disputes (ICSID), an international arbitration tribunal. In June 2023, the ICSID ruled in favor of the Nepal government, validating the tax assessment and rejecting Axiata’s claims.
This ruling was a significant victory for Nepal, as it upheld its right to tax foreign companies operating within its borders. However, the controversy surrounding Ncell’s tax affairs continues.
Despite the ICSID verdict, Axiata is still challenging the tax demand in the Nepali courts. Additionally, the recent sale of Ncell to a new entity raises new questions about the company’s future and its commitment to resolving its outstanding tax obligations.
Regulatory Concerns: Issues of Compliance and Fair Competition
Ncell has also faced accusations of violating Nepali telecommunications regulations. These allegations include manipulating tariffs, unfairly competing with other operators, and failing to meet quality of service standards.
The Nepal Telecommunications Authority (NTA), the country’s telecom regulatory body, has imposed fines on Ncell for various regulatory violations. However, critics argue that these penalties are not enough to deter further misconduct.
The issue of fair competition is particularly concerning. Ncell’s dominant market position allows it to exert significant influence over the industry. This raises concerns that smaller operators may be squeezed out of the market, leading to less choice and higher prices for consumers.
The Future of Ncell: Unclear Path Forward
The future of Ncell remains uncertain. With the ongoing tax dispute, regulatory challenges, and questions surrounding the ownership structure, the company faces a difficult road ahead.
The resolution of these issues will have a significant impact on the Nepali telecommunications sector. A fair and transparent resolution is crucial to ensure a healthy and competitive market that benefits both consumers and the wider economy.
- The Kathmandu Post
- Nepal Republic Media
- The Himalayan Times
- The Center for Investigative Journalism Nepal
Ncell’s saga highlights the complex challenges facing foreign investors and telecommunications companies operating in Nepal. The company’s past controversies underscore the importance of transparency, accountability, and adherence to regulations.
As Ncell navigates its uncertain future, it is crucial to ensure that the interests of both the company and the Nepali people are protected. Only then can the telecommunications sector reach its full potential and contribute to the country’s development.