Nepal’s Telecom crisis and the new leadership: Inside the Ncell saga and policy maneuvers

KATHMANDU: The responsibility to fix Nepal’s struggling telecommunications sector now rests on Arjun Ghimire, a seasoned official who has spent over two decades at the regulatory body. Appointed by the cabinet on July 7 (Asar 24), Ghimire takes charge as the new chairman of the Nepal Telecommunications Authority (NTA) for a five-year term.

He inherits an industry plagued by structural issues, with the immediate legal obligation to regulate major service providers, including state-owned Nepal Telecom, private giant Ncell, and various internet service providers (ISPs).

The challenges ahead are immense. The NTA currently faces a backlog of unresolved issues, including declining revenues across telecom operators, the impending 2029 (2086 BS) license expiration of Ncell, ownership and asset auction disputes of Smart Telecom, legal battles involving United Telecom Limited (UTL), and the stalled implementation of 5G technology.

Revitalizing this stagnant sector will require amending or replacing the nearly 30-year-old Telecommunications Act, a legal necessity that has been delayed for years.

Regulatory Backlogs and Immediate Hurdles

Smart Telecom’s assets and ownership remain trapped in auction disputes, while managing UTL, whose license is on the verge of cancellation despite intense past lobbying to save it, presents another hurdle. Industry insiders note that Chairman Ghimire’s primary task will be ensuring that the regulatory failures seen in the Smart Telecom case are not repeated.

However, the most significant issue on the NTA’s desk is Ncell, whose 25-year operating license reaches its term in three years. Finding a fair, lawful, and transparent resolution to this matter is critical for maintaining Nepal’s image as an attractive destination for foreign investment.

Within telecom and business circles, rumors persist that certain interest groups and corporate houses are attempting to force Ncell into state ownership to later secure it for themselves. Critics argue that recent policy amendments were deliberately engineered to support this outcome.

Under Section 33 of the Telecommunications Act 2053, any telecom company with more than 50% foreign ownership must transfer its infrastructure, network, towers, fiber, and switching equipment to the government once its 25-year license expires.

Because non-resident Nepali Satish Lal Acharya holds an 80% stake through foreign corporate entities while Nepali citizens hold 20%, Ncell falls squarely under this rule, making 2029 (2086 BS) a critical year.

Policy Deviations and Strategic Maneuvers

However, forcing nationalization is highly complex. The core spirit of the Telecommunications Act and the Foreign Investment and Technology Transfer Act (FITTA) explicitly protects and encourages foreign investment rather than discouraging it. Despite these statutory protections, critics claim that interest groups pushed through an amendment to the Telecommunications Regulations nearly two years ago to force a state takeover.

On October 28, 2024 (Kartik 12, 2081 BS), the government published a gazette notice introducing the Telecommunications (Tenth Amendment) Regulations, 2081. While Sections 25 and 33 of the parent Act allow licensees with foreign investment to modify their shareholding structure at any time during the license period, the amendment introduced a retroactive clause.

It tied license renewal to the capital structure present at the time the license was originally issued, a move Ncell previously condemned as an unfair step designed solely to target its operations.

The background of this conflict points to a longer strategic plan. Sources allege that plans were drawn up three to four years ago by a coalition of political figures and business houses to nationalize Ncell’s assets immediately after its license expires on August 31, 2029 (Bhadra 15, 2086 BS). The alleged ultimate objective is to bring in a pre-selected foreign mobile operator as a strategic partner, handing them market dominance.

To advance this agenda, a coordinated campaign has reportedly targeted Satish Lal Acharya’s businesses. This includes keeping Ncell entangled in permanent controversies and filing complaints with the Central Investigation Bureau (CIB) over Ncell’s mere participation in an asset auction held by Nepal Investment Mega Bank for Smart Telecom.

Insiders suggest that previous administrations adopted nationalization policies to secure substantial political donations from telecom ownership shifts, a strategy reflected in the high-profile Tankamani Sharma committee report. The current government may be pursuing its technical investigations into Ncell unaware of these underlying corporate dynamics.

The Path Forward and Legal Realities

Recently, Minister for Communication and Information Technology Dr. Bikram Timilsina stated that the government would decide Ncell’s fate strictly according to the law after 2029, adding that no one is above the law. While the state insists on compliance, the introduction of retroactive rules has complicated the regulatory environment.

With a few years remaining before the deadline, parliament still has time to amend the existing Telecommunications Act or introduce a comprehensive NTA Act. Furthermore, if Ncell challenges the government’s decisions in court, the judiciary could offer a different interpretation of the law, altering the current legal landscape.

In December last year, Ncell formally requested the government to reconsider the regulatory amendments, refrain from forced nationalization, and recognize its share transactions from two years ago. If the current legal framework remains unchanged, the transition will not happen overnight.

Nationalization does not mean Ncell changes its name instantly, its staff automatically become civil servants, or the government begins running the network the following day. The transfer involves asset evaluation, regulatory approvals, and establishing an operational modality to ensure service continuity.

Ultimately, Ncell retains a clear legal path to bypass nationalization entirely. If the company reduces its foreign shareholding to below 50%—by shifting Acharya’s 80% stake so that Nepali citizens hold a 51% majority—the asset transfer requirement would no longer apply.

For this restructuring to occur, the government would need to facilitate the process by validating recent share transfers and relaxing rigid regulatory barriers. So far, Ncell has not initiated this ownership shift, and the future of Nepal’s digital infrastructure now depends on how Chairman Arjun Ghimire balances these political pressures against legal and commercial realities.