UTL committed royalty dues pile up to Rs 1.22 billion

KATHMANDU, JAN 25 -

The outstanding committed royalty of United Telecom Limited (UTL) has surged to Rs 1.22 billion as of last fiscal year from Rs 952 million at the end of 2009-10.

At the same time, the telecom operator’s income dropped 4.88 percent to Rs 1.16 billion in FY 2010-11 compared to the previous year, according to a source at Nepal Telecommunications Authority (NTA).

Recently, UTL, the first private sector telecom operator of the country, submitted its financial statement to Nepal Telecommunications Authority (NTA) after paying 4 percent of its total income as royalty to the government. As per the

government provision, telecom companies have to submit their audit report to the NTA within mid-January every year.

The source said UTL paid Rs 46.56 million royalty, which is 4 percent of its last year’s income. As per the UTL’s licence condition for the basic telecom service, it has to pay the royalty amount, whichever is higher between the royalty amount committed while obtaining license and 4 percent of the total annual income.

As the committed royalty has remained higher than the 4 percent of income every year since its establishment, the dues piled up to reach Rs 1.22 billion. UTL has to pay Rs 324.18 million as committed royalty from the income of 2010-11 alone.

UTL’s profit has fallen despite a rise in its customer base in 2010-11, when it added 112,829 subscribers. In 2009-10, it had earned Rs 1.22 billion from 460,800 customers.

The dip in the income is attributed mainly to increased competition among major operators-Nepal Telecom and Ncell.  A UTL official said on condition of anonymity that the company could not make good income due to the lack of support from the regulatory body and negative publicity. UTL for long time has been asking the government either to waive off the committed royalty or renegotiate, saying that the company was facing losses due to the lack of equal treatment from the regulator. NTA three weeks ago had decided to close down UTL’s basic telecom services, but the decision has not been implemented yet.

However, a high-level official at the Ministry of Information and Communication said considering the seriousness of UTL’s case, the ministry is carrying out careful study before making any decision.

On Jan 3, NTA had written to the ministry asking for necessary help to close down UTL’s basic services and recover the royalty dues. Responding to the move, UTL had said that the committed royalty amount was set based on projected earnings, but factors such as delay in service operation in 2003, interference in network for a long time and stoppage of operation of the international gateway service for two years even after installing equipment cost it losses worth more than Rs 5 billion.

UTL’s income

Fiscal Year    Income    Change    4 % Royalty Paid

2010-11    Rs 1.16 billion    -4.88%    Rs. 46.56 million

2009-10    Rs 1.22 billion    59.70%    Rs 48.95 million

2008-09    Rs 766.29 million    3.62%    Rs 30.65 million

2007-08    Rs 739.48 million    8%    Rs 29.57 million

2006-07    Rs 684.11 million    121.92%    Rs 27.36 million

Source: Kantipur