Ncell’s ownership transfer:Lawmakers question dual pricing of Ncell shares

Saying that government agencies lack clarity in regard to existing legal provisions on tax system, Double Taxation Avoidance System (DTTA), and industry law, the Development Committee of parliament on Tuesday directed them to be clear on the procedure that TeliaSonera -- the parent company of Ncell -- needs to fulfill before transferring its shares to Malaysian company Axiata. The committee has asked Ministry of Information and Communications (MoIC), Ministry of Industry (MoI) and Ministry of Finance (MoF), and government agencies like Nepal Telecommunications Authority (NTA), Office of the Company Registrar (OCR) and Department of Inland Revenue (IRD) to find out whether a company can set different value for local and international shares within a week. Similarly, the parliamentary panel has asked the government agencies to state whether TeliaSonera should pay tax in Nepal or Norway and whether or not it should seek prior approval from the authorities before beginning ownership transfer process.  It has also directed the government authorities to state whether Bhavana Singh Shrestha, who already holds a stake in Smart Telecom, can own 20 percent stake in Ncell. TeliaSonera has already announced transfer of 80 percent of its shares to Axiata. Similarly, remaining 20 percent local shares, held by Niraj Govinda Shrestha, has been transferred to Bhavana Shrestha. Shares, however, have been priced differently. While TeliaSonera will be receiving Rs 136 billion for 80 percent of shares, Niraj will get only Rs 3.31 billion for 20 percent of the shares. The committee has also asked TeliaSonera if the 20 percent shares are actually held by Nepali citizen as the shares were mortgaged to TeliaSonera by its Nepali partner Niraj. “It seems that companies are not clear on whether they should seek prior permission before beginning share transfer process,” Rabindra Adhikari, chairperson of the committee, said. He also requested all the concerned stakeholders to learn from international practice and inform the panel within a week what amendments are needed to existing laws and regulations. Speaking at the discussion, Chudamani Sharma, director general of Department of Inland Revenue (IRD) said that Nepal needs to consider the fact that it has signed DTTA with Norway. “As the deal is between Malaysian company Axiata and Norwegian company TeliaSonera, TeliaSonera does not have to pay taxes in two different countries,” he said, adding, “This is based on the resident principle and source principle of taxation for income or profits resulting from international activities like cross border investment.” To address weak regulatory mechanism, make activities of multinational companies more transparent, and deal with issues emanating from shares transfer of TeliaSonera, the committee has asked the concerned authorities to make needful amendments to existing laws at the earliest so that the issue can be solved in an amicable environment without discouraging foreign direct investment (FDI). Minister for Information and Communications Sher Dhan Rai said that the ministry has not been informed about the activities within Ncell. Maha Prasad Adhikari, former deputy governor of Nepal Rastra Bank, said that the provision of taking prior approval from the regulatory body for ownership transfer should be made mandatory. NTA, the telecom regulator, however, does not have the authority to intervene share transfer activities of telecom operators as it has been authorized to regulate on licensing issues only. Speaking at the meeting, lawmakers said telecom operators should be made public limited company Erim Talyanlar, CEO of Ncell, said that they had tried to make Ncell a public company. “I am hopeful that the upcoming owner will also work in the same line,” he added. Adhikari said TeliaSonera should first be willing to launch Initial Public Offering (IPO) of Ncell and then choose the right way to be listed on the stock exchange. Kjell Lindstorm, senior advisor to TeliaSonera’s CEO Johan Dennelind, said that their decision to quit Nepal was not because of issues in the country. “We just wanted to focus on Nordic countries,” he said, adding, “After TeliaSonera’s entry in Nepal, competition among telecom companies grew and people has been easily getting SIM cards, and price of voice and data has also fallen, making Nepal among the top ten country with cheapest tariff.” According to latest report of International Telecommunication Union (ITU), Nepal is eighth in the list of countries with cheapest mobile tariff. Source: Republica