Government’s dual role raises fresh questions over telecom sector governance and growth

KATHMANDU: At a time when the government is projecting good governance, institutional reform and digital transformation as its key priorities, Nepal’s telecommunications sector continues to operate under a governance structure that many corporate governance experts describe as inherently conflicted.

Nearly three decades after Nepal Telecom was converted into a public limited company to compete in a liberalized market, the country’s largest telecom operator remains heavily influenced by the same ministry responsible for formulating telecommunications policy and overseeing the sector.

The issue has once again come into focus as discussions continue over a new Telecommunications Bill and broader reforms in the digital sector. Industry observers say the government has yet to address one of the sector’s longest-standing structural problems—the Ministry of Communication and Information Technology simultaneously acting as policymaker, regulator and direct manager of Nepal Telecom.

Under the existing arrangement, the Communication Secretary serves as the ex-officio chairperson of Nepal Telecom’s board of directors, while senior ministry officials also occupy board positions. The same ministry is responsible for drafting telecommunications policy, supervising the sector and representing the government’s ownership interests in the state-owned operator.

Critics argue that this creates a structural conflict of interest rarely seen in competitive industries.

“Any institution cannot effectively regulate a market while simultaneously managing one of its largest competitors,” said a former telecommunications official requesting anonymity because of the sensitivity of the issue. “Even if every official acts with complete integrity, the institutional design itself raises legitimate questions about neutrality.”

The contradiction becomes even more significant in a market where Nepal Telecom competes directly with private operators for customers, spectrum, infrastructure and emerging digital services.

Private telecom companies routinely require regulatory approvals for new technologies, tariffs, products and commercial initiatives. Those approvals ultimately pass through government institutions whose senior officials simultaneously participate in the management of Nepal Telecom.

Although there is no evidence that confidential commercial information has been misused or regulatory decisions intentionally influenced in favor of Nepal Telecom, industry experts argue that governance standards are designed not only to prevent actual conflicts but also to eliminate the appearance of institutional bias.

The debate also revives questions surrounding the purpose of Nepal Telecom’s corporate restructuring. The company was transformed from the former Nepal Telecommunications Corporation into Nepal Doorsanchar Company Limited with the expectation that it would operate as a commercially driven enterprise capable of competing in an increasingly liberalized market. However, many within the sector argue that while the legal structure changed, decision-making largely remained bureaucratic.

Large procurement decisions continue to move through lengthy government procedures, while strategic investments often require multiple administrative approvals. In a technology industry where network upgrades, cybersecurity investments and digital services evolve rapidly, delays in procurement and decision-making can directly affect competitiveness.

Several former executives say Nepal Telecom has struggled to match the speed of private operators not because of technical capability but because of institutional constraints.

The governance debate has become more pronounced following reports that provisions under discussion in the proposed Telecommunications Bill could allow ministry officials to play an even greater role in the governance of the regulator. If implemented without stronger institutional safeguards, critics warn that the separation between policymaking, regulation and commercial operations could become even less distinct.

Corporate governance specialists point out that internationally accepted governance models generally separate these functions. Governments formulate policy, independent regulators oversee competition and consumer protection, while state-owned enterprises operate through professionally appointed boards with limited day-to-day political involvement. Such arrangements are intended to protect competitive neutrality, strengthen investor confidence and improve operational efficiency.

Nepal, however, continues to combine these responsibilities within the same institutional framework.

The issue is not limited to Nepal Telecom alone. Private telecom operator argue that uncertainty over regulatory independence affects long-term investment decisions in an industry that requires continuous capital expenditure in network expansion, fiber deployment, data centers and next-generation technologies.

Investors generally seek predictable regulatory environments where commercial decisions are insulated from potential policy conflicts. Industry analysts say Nepal’s governance model risks creating uncertainty at a time when the country is seeking greater private investment in digital infrastructure.

The debate also comes as Nepal seeks to accelerate digital transformation under various government initiatives. Telecommunications infrastructure has become central to digital banking, e-commerce, cloud computing, artificial intelligence, online education and digital public services. Any institutional arrangement that slows investment or weakens competition ultimately affects consumers through slower innovation and delayed service improvements.

At present, Communication Secretary Laxmi Kumari Basnet chairs Nepal Telecom’s board in an ex-officio capacity, while Joint Secretary Subash Chandra Shibakoti also serves as a board member under the existing legal framework. Their appointments comply with current laws, and the debate is not centered on individual officeholders but on whether the governance structure itself has become outdated for a competitive telecommunications market.

As Nepal promotes transparency, good governance and market-oriented reforms across other sectors, telecommunications remains one of the few industries where the government continues to wear multiple hats at once—as policymaker, shareholder and boardroom decision-maker. Analysts say unless those roles are institutionally separated, questions over regulatory neutrality and fair competition are likely to persist, leaving Nepal Telecom caught between commercial competition and bureaucratic control.