Axiata Group's Decision to Exit Ncell Sends Ripples Through Nepal's Telecom Sector

Wed, Nov 29, 2023 2:47 PM on Economy, National, Latest,

In a surprising turn of events, Axiata Group, the major shareholder in Nepal's telecommunications giant Ncell, has announced its decision to exit the company by selling its shares. The move comes amid what the company describes as a challenging business environment in Nepal.

According to Axiata, the board of directors has collectively decided to divest from Ncell, citing the challenging business landscape in Nepal as the primary reason. The company states that this strategic decision aligns with its long-term goals and aims to benefit investors in the future. The announcement is poised to deliver a negative message to foreign investors at a time when the government of Nepal is gearing up to host an investment conference to attract foreign capital. Axiata's move to sell its shares raises concerns about the attractiveness of Nepal's investment climate.

Ncell, a prominent player in the Nepali telecommunication sector, justifies the exit by highlighting a lack of business expansion and a decline in revenue. In 2023, the company reported a turnover of 37.44 arba rupees, a decrease from 39.72 arba rupees in 2022. This marks a significant drop from its peak turnover of 57.10 arba rupees in 2017.

Ncell attributes its shrinking market share to a recent decline in users, revealing a market occupancy decrease from 61% in 2020 to 54% in the current year. The telecommunications company, originally established as Spice Nepal Pvt Ltd in 2001, operated under the Mero Mobile brand before being acquired by the European telecom giant TeliaSonera and subsequently rebranded as Ncell in 2016.

Axiata Group Berhad took an 80% stake in Ncell through Reynold Holding Limited  and Sunivera Capital Ventures Pvt Ltd in 2022. Notably, in the same year, Ncell generated 57% of its income from data services.

Despite its decision to exit, Ncell asserts its significant contribution to Nepal's economy, citing a 1.3% contribution to the gross domestic product in the year 2021/22. The company claims to have paid over 2.83 kharba rupees in taxes to the government and contributed more than 20 arba rupees in taxes and fees, along with over 1.75 arba rupees in social work.

In terms of revenue collection, Ncell asserts a 1.9% contribution to the Government of Nepal for the fiscal year 2021/22. The telecom giant has been a substantial employer, directly and indirectly providing jobs to more than 23,000 individuals.

As Axiata Group prepares to divest from Ncell, the telecom industry in Nepal faces uncertainty, and the government's efforts to attract foreign investment may encounter challenges in light of this significant exit.