Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Ncell Axiata Limited has once again urged the Nepal government to review a series of decisions, licensing conditions and regulatory changes that the company says are legally inconsistent, unfair and detrimental to foreign investment and the long-term development of Nepal’s telecommunications sector.
Ncell submitted another letter to the Office of the Prime Minister and Council of Ministers on Wednesday, requesting a review of what it describes as unlawful government decisions, unjust conditions imposed during the renewal of its telecommunications license and the retrospective amendment made to the Telecommunications Regulations.
The company has argued that the decisions and conditions have created uncertainty over its investment and future operations in Nepal and could negatively affect the country’s broader foreign investment environment. It has therefore asked the government to reconsider the relevant decisions and regulatory provisions and issue necessary directions to the concerned authorities.
Ncell had previously submitted a similar request on January 8, 2026, to the Prime Minister’s Office, relevant ministries and departments, and the Nepal Telecommunications Authority (NTA). However, the company says it has not received a decision or direction from the government. It has therefore renewed its request for a review.
The latest move comes against the backdrop of a Supreme Court order directing the concerned authorities to act in accordance with prevailing law. Ncell believes the matter can now be resolved through a legal and regulatory process.
The dispute dates back to the decision by Axiata Investment UK, the former investor and shareholder of Ncell, to exit Nepal by selling its stake in Reynolds Holdings Limited.
Following the decision, the shares were put up for sale, and Spectrlite UK Limited, a company established with 100 percent investment by Nepali citizen Satish Lal Acharya, acquired the 80 percent ownership in Ncell held through Reynolds Holdings from Axiata Investment UK on December 1, 2023.
The transaction was based on a share purchase agreement reached between Spectrlite UK and Axiata Investment UK under mutually agreed commercial terms.
Reynolds Holdings remains the entity through which an 80 percent stake in Ncell is held.
The transaction subsequently triggered controversy over whether prior approval should have been obtained from the Nepal Telecommunications Authority under the Telecommunications Regulations. The NTA did not recognize the transaction in its existing form, arguing that the required prior approval had not been obtained.
A separate legal challenge was also filed at the Supreme Court by former lawmaker Amaresh Kumar Singh, seeking to invalidate the share transaction and agreement. The case was later dismissed after the court issued a directive instructing the concerned authorities to proceed in accordance with prevailing law.
According to Ncell, controversy and public debate surrounding the buyer and seller led the then government to form a high-level investigation committee. The company argues that a purely commercial transaction was subsequently elevated to the Cabinet level, resulting in decisions that it considers unfair.
The government subsequently took a decision on February 19, 2024, which became the basis for several conditions later imposed on Ncell during the renewal of its telecommunications license.
Based on the government’s decision, the Nepal Telecommunications Authority renewed Ncell’s mobile service license for five years, effective September 1, 2024, subject to a number of conditions.
Under the first condition, Ncell was required to pay the outstanding license renewal fee in three remaining installments of Rs 5 billion each.
The second condition required the company to pay annual interest at a rate of 10 percent on the installment amount, calculated up to the date of payment, along with the principal installment. If the company wished to pay the installment before the scheduled deadline, it could do so by paying the installment amount together with interest accrued up to the date of payment.
The third condition required the annual installment and interest amount to be paid by September 1 each year.
The fourth and most contentious condition concerns Ncell’s ownership structure after the 25-year license period expires.
Under this condition, if Ncell’s technical, financial and managerial capacity is deemed sufficient to ensure continuity of its services, the company would not be allowed to alter its existing shareholding structure at the time of license renewal. The condition was linked to the government’s eventual ownership of land, buildings, machinery, equipment and infrastructure associated with telecommunications services under Section 33 of the Telecommunications Act, 1997, after the expiry of the 25-year license period.
The fifth condition states that failure to comply with the prescribed conditions could lead to the initiation of procedures to revoke the license under Section 28 of the Telecommunications Act and other prevailing laws.
The sixth condition provides that additional conditions may be imposed by the NTA from time to time.
Ncell has argued that the Cabinet decisions of February 19, 2024, and September 13, 2024, as well as the conditions imposed by the NTA during the license renewal process, are unlawful and unfair. The company believes the decisions should be reviewed to ensure continuity of telecommunications services in Nepal, protect foreign investment and secure the long-term future of the sector.
A high-level study and investigation committee led by Tankamani Sharma had recommended that conditions be introduced to ensure that the government could assume ownership of telecommunications-related land, buildings, machinery, equipment and infrastructure after the expiry of a 25-year license where more than 50 percent of the capital investment was foreign-owned.
However, Ncell has pointed out that the Telecommunications Act itself does not prohibit the transfer or sale of shares.
According to the company, even if the government assumes ownership of relevant telecommunications assets after the license period expires, the law allows the former license holder to reacquire those assets by paying the value determined by the government and obtain a new license.
Ncell argues that the committee did not adequately address this aspect of the law.
The company also acknowledges that it did not obtain prior approval for the share transaction but maintains that it submitted the required information and applications within the legal framework applicable to foreign investment.
According to Ncell, it submitted information about the transaction to the Department of Industry within the timeframe prescribed by Section 19 of the Foreign Investment and Technology Transfer Act, 2019. It also submitted an application to the NTA for approval and provided a copy of the bilateral agreement between the buyer and seller.
Ncell further argues that its license has already been renewed after the government and the NTA assessed its technical, financial and managerial capabilities. Since the company has continued operating without interruption, it believes the transaction should now be recognized through an appropriate regulatory process.
Another major point raised by Ncell concerns the 10th amendment to the Telecommunications Regulations, which was published in the Nepal Gazette on October 28, 2024.
The company argues that Sections 25 and 33 of the Telecommunications Act do not prohibit a licensed telecommunications service provider with foreign investment from changing its shareholding structure during the validity of its license.
According to Ncell, the law does not prevent investors from reducing foreign ownership to 50 percent or below if they choose to do so.
The company argues that the amended regulations introduced a new provision under Rule 7A that refers to the capital investment structure at the time the license was originally obtained. Ncell claims this provision is inconsistent with the Telecommunications Act and the principles governing delegated legislation.
The company’s argument is that the law should consider the shareholding structure existing when the license expires rather than the capital investment structure that existed when the original license was issued.
Ncell has described the chain of events—including the high-level committee’s recommendations, the Cabinet’s decisions, the NTA’s license renewal conditions and the subsequent regulatory amendment—as unfair and detrimental to the company.
According to the Cabinet’s February 19, 2024 decision, the NTA was instructed to renew Ncell’s license if the company submitted an application in accordance with prevailing law, paid the required renewal fees and demonstrated sufficient technical, financial and managerial capacity to ensure continuity of its services.
Ncell’s license expired on September 1, 2024. The company submitted its renewal application within the prescribed period and paid the required fees.
Following the Cabinet’s September 13, 2024 decision, the NTA renewed Ncell’s license for another five years, effective September 16, 2024.
Ncell argues that this renewal itself demonstrates that its technical, financial and managerial capacity had been established. As a result, the circumstances that had existed when the Cabinet made its earlier decision had materially changed.
The company therefore believes that the share purchase agreement dated December 1, 2023, should now be accepted and that the government should facilitate Ncell’s continued operation.
Section 33 of the Telecommunications Act provides that after the expiry of the license period, telecommunications-related land, buildings, machinery, equipment and infrastructure associated with a company having more than 50 percent foreign capital investment will come under government ownership.
However, Ncell emphasizes that the law does not provide for the transfer of the company’s shares to the government.
Instead, under Section 33(2), the former license holder can continue operating the telecommunications service by paying the value determined for the assets and obtaining a new license.
Similarly, Section 33(4) provides a mechanism under which a telecommunications service provider with up to 50 percent foreign investment can obtain a new license after the expiry of the existing license.
Ncell therefore argues that the law does not prohibit it from reducing its foreign ownership from 80 percent to 50 percent or below.
The company claims that the government’s restrictions on changes in its shareholding structure go beyond what is provided in the Telecommunications Act.
Ncell has further argued that imposing a condition preventing changes in its ownership structure effectively interferes with shareholders’ property rights. It says the relevant telecommunications assets—not the company’s shares—are the subject of the ownership provisions under Section 33.
Ncell has outlined several reasons why it believes the government should ensure the continuity of its mobile license beyond the 25-year period.
First, the company says it is one of Nepal’s largest taxpayers and has contributed approximately Rs 375 billion to government revenue over the years. Continued operation after 2029, according to Ncell, would ensure a sustained source of government revenue.
Second, Ncell has contributed to the expansion and quality improvement of telecommunications and internet services in Nepal for more than two decades. Continued licensing would encourage investment in 5G and other advanced technologies and support Nepal’s digital transformation.
Third, the company claims to have created direct and indirect employment opportunities for more than 100,000 Nepalis. It argues that its continued operation would support further job creation and technology and knowledge transfer.
Fourth, Ncell considers itself a successful example of foreign direct investment in Nepal. It believes that ensuring continuity after the license period would send a positive signal to international investors about Nepal’s commitment to protecting and promoting foreign investment.
Fifth, Ncell’s mobile and internet infrastructure supports digital banking, fintech, ride-hailing, delivery services, e-governance, telehealth, small and medium-sized businesses and e-learning.
Finally, the company argues that continued operation would allow it to expand its network and invest in emerging technologies, including data centers and artificial intelligence.
Ncell has warned that uncertainty over the continuity of its license could create significant risks for Nepal’s telecommunications sector and digital economy.
The company argues that any disruption to its services could not easily be compensated for by other operators, particularly in remote parts of the country. Millions of users could lose access to high-speed internet, affordable mobile services and technological innovations.
Ncell has also warned that if the government takes ownership of its telecommunications-related land, buildings, equipment and infrastructure in 2029, uncertainty could emerge over the company’s ability to continue operating. The company estimates that approximately 14 million customers could potentially be affected.
The disruption could also affect banks, financial institutions and other businesses that rely on mobile and internet connectivity. According to Ncell, the impact could extend to thousands of businesses and millions of consumers, particularly in remote areas.
The company also argues that uncertainty could slow the development of Nepal’s digital economy by weakening competition, network expansion and investment in innovation.
Another concern raised by Ncell is the potential impact on foreign investment. The company says that failure to ensure continuity could send a negative message to international investors and potentially expose Nepal to international investment disputes.
Ncell has also pointed to the difficulties faced by authorities in managing the assets and operations of telecommunications companies previously taken under regulatory control, including Smart Telecom and United Telecom.
According to the company, delays in ownership transfers, auctions, legal disputes and asset management could result in service disruptions, unemployment, loss of government revenue and broader economic consequences.
Ncell has presented several arguments in support of recognizing the 2023 share purchase agreement.
The company says the circumstances underlying the Cabinet’s February 19, 2024 decision have materially changed. The buyer has operated Ncell continuously for approximately two years with experienced international management, and the company’s technical, financial and managerial capabilities have subsequently been demonstrated.
The company also points to the fact that its license was renewed after the government and NTA assessed its technical, financial and managerial capacity.
Ncell says it has also fulfilled its tax obligations arising from the change in ownership. It submitted separate financial statements before and after the change in ownership under Section 57 of the Income Tax Act and paid approximately Rs 1.696 billion in tax liabilities to the Large Taxpayers Office.
The company maintains that it has submitted the required documents to the Department of Industry and the NTA, including documents related to the buyer’s technical knowledge, financial strength and managerial capacity.
Ncell argues that if prior approval was required but was not obtained, the matter can be addressed through an appropriate regulatory process and penalties under the Telecommunications Act, rather than blocking the entire commercial transaction.
Ncell has also challenged the condition preventing changes to its existing shareholding structure.
The company argues that preventing shareholders from selling or transferring shares restricts their constitutionally protected property rights and their rights to establish and operate businesses.
It has also cited the Companies Act, which allows shares to be sold or pledged as movable property.
Ncell maintains that the government’s condition effectively interferes with rights governed by company law and goes beyond the scope of the Telecommunications Act.
The company further argues that the condition is inconsistent with Nepal’s foreign investment policy, which provides national treatment to foreign investment, as well as provisions of the Foreign Investment and Technology Transfer Act.
Ncell’s third major demand concerns the retrospective nature of Rule 7A introduced through the 10th amendment to the Telecommunications Regulations.
The company argues that the Telecommunications Act does not prohibit foreign-invested license holders from changing their ownership structure during the license period.
According to Ncell, the amended regulation introduced a requirement based on the capital investment structure at the time the license was originally obtained, rather than the ownership structure existing when the license expires.
The company argues that the amendment effectively creates a condition that investors could not have anticipated when they originally invested in Nepal.
Ncell has therefore requested that the provision be repealed, arguing that it violates both the Telecommunications Act and the principles governing delegated legislation.
Ncell has proposed that the government review the Cabinet’s February 19, 2024 decision and recognize that circumstances have changed since the original decision was made.
The company argues that because it has continued operating and its license was renewed after its technical, financial and managerial capabilities were assessed, the government should direct the Ministry of Communications and Information Technology and the NTA to recognize the share purchase agreement.
It has also proposed that the Department of Industry record the share transaction in accordance with applicable law.
Regarding the failure to obtain prior approval, Ncell has suggested that the NTA impose the maximum penalty permitted under Section 47 of the Telecommunications Act, if deemed appropriate, while ensuring that future transactions comply fully with regulatory requirements.
The company has also asked the government to remove the condition preventing changes to its shareholding structure and repeal Rule 7A introduced through the 10th amendment to the Telecommunications Regulations.
Ncell has also proposed an alternative pathway under which the government could require the company to increase Nepali ownership.
Under the proposal, the existing investment of Nepali citizens and institutions could be increased to more than 50 percent, effectively transforming Ncell into a predominantly Nepali-owned company.
The company has also proposed issuing shares to the general public through an initial public offering, allowing proportional representation of public shareholders on the company’s board.
Ncell has suggested that, following recognition of the share transaction and the creation of a majority Nepali-owned company, the company could invest in advanced technologies and receive sufficient spectrum to launch new services.
The company has further proposed that the government provide a new license under Section 33(4) of the Telecommunications Act, with the NTA responsible for implementation, monitoring and facilitation.
Ncell says it paid approximately Rs 1.69 billion in tax liabilities arising from the change in ownership associated with the December 1, 2023 transaction.
The company submitted separate financial statements before and after the ownership change under Section 57 of the Income Tax Act and paid the assessed liability to the Large Taxpayers Office on February 26, 2024.
Ncell has also committed to paying any additional tax liability that may subsequently be determined by an authorized government agency in accordance with law.
The company argues that the transaction itself did not generate a capital gain and therefore should not attract capital gains tax.
Ncell has also stated that the 80 percent foreign stake had previously been valued at around Rs 144 billion in an earlier transaction, while the latest transaction was conducted at a lower value. According to the company, the buyer and seller have publicly disclosed the transaction and the share purchase agreement has been submitted to the relevant regulatory bodies.
The company has also highlighted its earlier tax dispute involving the acquisition of Ncell shares by Axiata and TeliaSonera.
Ncell says it fully complied with the Supreme Court’s decisions and paid approximately Rs 47 billion in capital gains tax related to that earlier transaction.
According to the company, the tax was paid in multiple installments, with the final installment paid in March 2020 during the COVID-19 pandemic.
Ncell has argued that because capital gains tax associated with the earlier transaction has already been paid, the government should not impose a duplicate tax liability on the same transaction.
The company has provided a breakdown showing total capital gains tax payments of Rs 47.0099 billion.
Ncell has based part of its argument on Nepal’s foreign investment laws and international investment protection commitments.
The Foreign Investment Policy, 2014 provides national treatment to foreign investment and states that foreign investment should not be nationalized while it remains in Nepal, except under applicable legal provisions and with compensation where required.
Similarly, the Foreign Investment and Technology Transfer Act, 2019 contains provisions concerning national treatment and protection against nationalization.
Ncell has also cited the bilateral investment protection agreement between Nepal and the United Kingdom, arguing that investments should not be subject to nationalization or measures equivalent to expropriation except for public purposes and under applicable legal safeguards.
The company maintains that restrictions on the transfer of shares could conflict with these protections and negatively affect Nepal’s reputation as an investment destination.
Ncell has also objected to the interest imposed on its license renewal installments.
The company argues that Nepal Telecom, a state-owned telecommunications provider offering similar services, was allowed to renew its license after the prescribed period without the same interest burden imposed on Ncell.
Ncell claims that requiring it to pay interest while also requiring renewal fees before the end of the relevant period represents discriminatory treatment.
The company argues that the additional interest requirement was not contemplated by the Telecommunications Act and that the ownership restrictions imposed during license renewal undermine shareholders’ property rights.
It also claims that imposing additional conditions at the executive level, beyond those provided by legislation, undermines the autonomy of the telecommunications regulator.
Ncell argues that share ownership changes are governed by company law and are fundamentally commercial decisions. Making them a condition for telecommunications license renewal, it says, has negatively affected investor confidence and raised questions about Nepal’s international commitments.
Ncell has made a series of requests to the government.
It has asked the government to immediately reconsider the Cabinet’s February 19, 2024 decision and the conditions imposed by the NTA during the September 2024 license renewal.
It has requested recognition of the share transaction involving Reynolds Holdings and argued that the transaction should be approved through an appropriate regulatory process.
The company has also asked the government to recognize that its technical, financial and managerial capabilities have already been assessed through the license renewal process.
Ncell has requested that the interest imposed on the license renewal fees be waived and that it be treated in the same manner as Nepal Telecom.
It has also called for clear policy and legal distinctions between telecommunications service providers and internet service providers regarding license fees, renewal charges, spectrum costs, service conditions, rights and obligations.
The company says regulatory uncertainty has prevented its activities from progressing smoothly across various government agencies and has created legal and operational complications.
Most importantly, Ncell has asked the government to ensure continuity of its mobile license after the 25-year license period expires.
The company argues that this is essential for the continuity of telecommunications services, the interests of approximately 14 million customers, employment, government revenue, digital transformation and future investment in technologies such as 5G and 6G.
Ncell has presented three possible options to the government.
The first is to repeal Rule 7A introduced through the 10th amendment to the Telecommunications Regulations and increase the existing ownership of Nepali citizens and institutions in Ncell to more than 50 percent.
The second is to review the Cabinet’s February 19, 2024 decision and implement Section 18A of the Foreign Investment and Technology Transfer Act to transform Ncell into a Nepali-owned company.
The third option is to allow Ncell, as a public limited company under the Companies Act, to issue shares to the general public in accordance with securities laws.
Under this option, the company could establish majority Nepali ownership by selling shares to the public and Nepali institutions.
Ncell has said the precise allocation of shares between the general public, institutions and potentially customers, as well as the issue price and valuation, could be determined at a later stage.
Ncell has warned that failure to find a timely solution could result in investment disputes, service disruptions and uncertainty over the future of Nepal’s telecommunications industry.
The company has pointed to past cases where the failure to resolve telecommunications license renewal issues in a timely manner resulted in financial losses, unemployment and reduced government revenue.
Ncell says it is prepared to increase Nepali ownership to more than 50 percent and is open to issuing shares to the general public.
The company has also committed to investing in advanced technologies and strengthening its network if continuity of operations is guaranteed beyond the expiry of its existing license.
It says it is prepared to support the government’s Digital Nepal agenda by becoming a modern telecommunications company capable of supporting an increasingly mobile-driven digital economy.
Ncell has warned that implementation of what it considers unfair decisions could create serious problems for the telecommunications industry, the government, consumers, Nepal’s emerging digital ecosystem and the company itself.
Ncell is one of Nepal’s first GSM mobile service providers and one of the country’s largest taxpayers. The company says it has been providing telecommunications services to more than 14 million Nepalis for more than two decades.
It has expanded 4G mobile broadband coverage to approximately 95 percent of the population, helping reduce the digital divide and expand internet access to people in remote parts of Nepal.
The company argues that mobile connectivity has become a critical tool for exercising citizens’ right to information and communication.
Ncell says it has contributed approximately Rs 375 billion to the national treasury since its establishment and spent more than Rs 2 billion on corporate social responsibility initiatives covering health, education, environment, arts and culture.
It has also supported sports, including football and cricket, and contributed to disaster preparedness by providing early warnings related to floods, landslides and other weather-related disasters.
Ncell’s latest appeal comes at a time when Nepal’s broader telecommunications industry is facing financial and structural challenges.
According to the company, the telecommunications sector previously contributed around 4 percent of Nepal’s gross domestic product. Industry revenue, which once reached approximately Rs 100 billion, has now declined to around Rs 68–70 billion.
Ncell says it alone contributes approximately 50 percent of its annual income to the government through various taxes and fees.
The company also points to the growing penetration of smartphones, increasing use of over-the-top services, high tax and regulatory costs, delays in adjusting service charges and business models, expensive spectrum fees and the substantial investment required for new technologies as factors contributing to declining revenue and profitability.
The company argues that the combined effect has weakened the ability of telecommunications operators to invest in new infrastructure and technologies.
Ncell has warned that if the current trend continues, telecommunications operators—particularly mobile service providers—could face increasing difficulty covering operating costs within the next five years.
It has also raised concerns about what it describes as regulatory disparities among service providers, including differences in license fees, telecommunications charges, renewal fees and other regulatory requirements.
The company believes that addressing these structural issues, alongside resolving the dispute over its ownership and license renewal conditions, will be critical for ensuring the long-term sustainability of Nepal’s telecommunications sector.
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