Ncell’s future in Nepal’s 5G era hangs on regulatory certainty, Foreign investment debate

KATHMANDU: Nepal’s telecommunications sector is entering a critical phase as the country looks toward next-generation connectivity, 5G deployment, artificial intelligence (AI), data-driven services and a broader digital economy, but uncertainty surrounding the future of Ncell has emerged as a major issue for the sector’s long-term technology development.

Ncell has once again urged the Government of Nepal to review decisions and regulatory conditions imposed on the company, arguing that the measures could affect foreign investment, telecom infrastructure development and the continuity of digital services in the country.

In a recent letter to the Office of the Prime Minister and Council of Ministers, Ncell requested a review of what it described as unlawful government decisions, unfair conditions imposed during the renewal of its mobile service license, and the retrospective amendment to the Telecommunications Regulations.

The company has argued that resolving the regulatory dispute is important not only for its own business operations but also for Nepal’s broader telecommunications ecosystem, investment climate and future digital transformation.

At the center of the dispute is the December 2023 transfer of the 80 percent ownership of Ncell’s parent company, Reynolds Holdings, from Axiata Investments UK to Spectrlite UK, a company wholly owned by non-resident Nepali citizen Satish Lal Acharya.

The transaction triggered regulatory and political controversy, followed by government decisions that resulted in specific conditions being attached to Ncell’s license renewal.

Ncell now argues that the circumstances have changed since those decisions were made and that the company’s technical, financial and managerial capabilities have already been demonstrated through the continued operation of its network and the renewal of its license.

The debate has taken on added importance as telecom operators worldwide move toward 5G, advanced mobile broadband, cloud-based services, AI applications and increasingly data-intensive digital ecosystems.

5G and Next-Generation Connectivity at the Center of the Debate

The future of Nepal’s telecom sector will depend heavily on the ability of operators to invest in modern network infrastructure and adopt next-generation technologies.

Ncell has argued that certainty over the continuity of its operations and license is essential to encourage further investment in 5G and other emerging technologies.

According to the company’s position, the continuation of its operations could encourage investors to commit capital to advanced telecom infrastructure, while uncertainty could discourage long-term investment decisions.

The company has specifically highlighted the potential for future investments in 5G networks, data centers and artificial intelligence, arguing that telecom infrastructure is increasingly becoming the backbone of the digital economy.

The evolution from conventional mobile connectivity to 5G is expected to involve more than faster internet speeds. Next-generation networks can support large-scale machine-to-machine communication, low-latency applications, smart infrastructure, industrial automation and advanced digital services.

For Nepal, the development of such infrastructure could influence the expansion of digital financial services, e-commerce, telemedicine, e-learning, cloud services and other technology-driven industries.

Ncell’s argument is that a stable and predictable regulatory environment would provide investors with greater confidence to make long-term commitments to these technologies.

The company has also proposed that, if its ownership structure is regularized and its operations continue, it could be directed to invest in advanced technologies available in the global telecommunications market and launch new services within a specified period.

Such an approach, according to the company’s proposal, could link regulatory resolution with concrete technology investment commitments.

Telecom Networks Have Become the Backbone of the Digital Economy

The significance of the dispute extends beyond mobile voice and data services.

Ncell has described its network as an important foundation for a wide range of digital services used by individuals, businesses and institutions across Nepal.

Mobile connectivity now supports digital payments, mobile banking, fintech platforms, ride-hailing services, food and delivery platforms, e-commerce, e-learning, telehealth and e-governance.

As these services increasingly depend on continuous and high-quality internet access, telecom infrastructure has become a critical component of the country’s economic infrastructure.

The company has argued that any disruption to its operations could therefore have consequences extending beyond the telecommunications industry.

The source material states that millions of people and businesses rely on Ncell’s network and that the company directly and indirectly supports more than 100,000 jobs. It also identifies Ncell as one of Nepal’s major taxpayers, with the company stating that it has contributed approximately NPR 375 billion to the government treasury to date.

From a technology perspective, the argument is that telecom networks are no longer simply communication infrastructure. They are increasingly the underlying connectivity layer for the digital economy.

The next stage of this transformation will require networks capable of supporting significantly higher data consumption and new categories of connected devices and services.

This is where the 5G debate becomes particularly relevant.

5G Investment Requires Long-Term Regulatory Visibility

Telecommunications infrastructure requires substantial capital expenditure and long investment horizons.

Operators investing in network modernization must make decisions about spectrum, radio equipment, fiber backhaul, data centers, cloud infrastructure, cybersecurity and other supporting technologies.

The return on such investments may take years to materialize.

Ncell has therefore argued that uncertainty over its long-term license continuity could affect investors’ willingness to finance new technology infrastructure.

The company has warned that the uncertainty surrounding its future could affect plans to expand network coverage and invest in new technologies.

The argument is particularly significant as Nepal considers how to transition toward more advanced mobile connectivity.

A 5G ecosystem requires more than simply activating a new network standard. It requires investment across the broader telecommunications value chain, including network densification, fiber connectivity, spectrum resources, cloud and edge computing capabilities, cybersecurity and skilled human resources.

In this context, the regulatory environment becomes a critical factor in determining whether operators are willing to commit significant capital to next-generation infrastructure.

Ncell has maintained that guaranteeing operational continuity could provide a stronger basis for such investment.

The 2029 Question and Risk of Service Disruption

A major part of the dispute concerns the future of Ncell’s license after the completion of its current license period.

Ncell has argued that uncertainty over the ownership of telecom-related assets and the continuation of services could create significant operational risks.

The company has warned that if its land, buildings, equipment and other telecom-related infrastructure were transferred to government ownership without a clear mechanism for ensuring uninterrupted service, the process could create uncertainty for customers, employees, investors and the wider digital economy.

The company has also argued that such uncertainty could affect millions of customers and businesses dependent on its network.

In an increasingly digital economy, even a temporary disruption to a major telecom network could have consequences for digital payments, banking connectivity, online businesses, logistics, education and public services.

The company has cited previous difficulties associated with the management of telecom operators whose assets and operations came under regulatory control as an example of the potential administrative and operational challenges.

Ncell’s position is that the government should establish a clear and predictable mechanism for continued service delivery, rather than allowing uncertainty to affect the country’s digital infrastructure.

Foreign Investment and Technology Transfer

The Ncell dispute also carries implications for Nepal’s foreign direct investment (FDI) environment.

The company has described itself as a significant example of foreign investment in Nepal and has argued that the government’s treatment of its ownership transfer could influence international investors’ perception of the country’s investment climate.

This issue becomes particularly important in technology-intensive sectors.

Telecommunications companies often bring not only capital but also global technical expertise, network management capabilities, cybersecurity practices and technology partnerships.

For a country such as Nepal, attracting long-term investment into advanced digital infrastructure may require a regulatory framework that provides investors with clarity regarding ownership, licensing and asset management.

Ncell has argued that ensuring continuity of its operations would send a positive signal to foreign investors and demonstrate that Nepal protects investment and respects legal commitments.

At the same time, the government has a legitimate interest in ensuring that critical telecommunications infrastructure remains aligned with national security, public interest and regulatory requirements.

The challenge, therefore, is to establish a framework that protects national interests while also maintaining investor confidence and encouraging technology investment.

Supreme Court Order Adds Another Dimension

The legal dispute over the ownership transfer has also reached the Supreme Court.

According to the material submitted by Ncell, a petition challenging the share transaction was dismissed by the Supreme Court, while the court issued a directive to the relevant authorities to proceed according to prevailing law.

Ncell has argued that the court’s position, combined with the subsequent renewal of its license and continued operation, demonstrates that the circumstances surrounding the original government decisions have changed.

The company has therefore asked the government to review the decisions and regulatory provisions that it considers restrictive.

The dispute also involves the Telecommunications Act, the Companies Act, the Foreign Investment and Technology Transfer Act and the Telecommunications Regulations.

Ncell has specifically challenged the retrospective nature of Rule 7A introduced through the Telecommunications (Tenth Amendment) Regulations, arguing that the provision was inconsistent with the underlying Telecommunications Act.

The company maintains that the regulatory amendment should be reviewed because it believes the provision effectively links license renewal to the capital investment structure existing at the time the license was initially issued.

Ncell Proposes Technology Investment as Part of the Solution

One of the proposals outlined in the material is to link the resolution of the ownership dispute with concrete investment and technology commitments.

Under the proposed approach, Ncell could be directed to increase Nepali participation in its ownership structure, issue shares to the general public in accordance with securities laws and invest in advanced technologies.

The proposal also suggests that the company could be required to invest in advanced technologies available in the global telecom market and launch new services within one year of recording the share transaction and transitioning to majority Nepali ownership.

If implemented, such a framework could potentially connect regulatory compliance with measurable technology development targets.

The government could, for example, establish specific requirements related to network expansion, next-generation mobile services, rural connectivity and digital infrastructure investment.

Such a model could transform the current dispute from a purely legal and ownership-related issue into a broader policy framework focused on the future of Nepal’s digital economy.

From 4G to 5G and Beyond

Nepal’s telecom sector is moving toward a period in which the demand for high-speed connectivity will continue to increase.

The growth of AI-powered applications, cloud computing, digital commerce, online education, telemedicine and connected devices will require increasingly reliable and capable networks.

5G could play a role in this transformation, but its success will depend on the broader digital ecosystem.

High-capacity fiber networks, data centers, cloud infrastructure, cybersecurity, digital skills and affordable access will all be necessary to translate next-generation connectivity into economic benefits.

Telecom operators therefore have an increasingly strategic role in Nepal’s development.

The Ncell case illustrates how questions of corporate ownership, license renewal and regulatory certainty can have implications far beyond a single company.

For Nepal, the central policy challenge is how to create a predictable environment that encourages investment in next-generation technologies while protecting national interests and ensuring regulatory compliance.

The Road Ahead

Ncell has requested that the government review the Cabinet decisions of February and August 2024, reconsider the conditions imposed during its license renewal and review the retrospective regulatory amendment.

The company has also proposed a possible path involving changes in ownership, public share issuance, investment in advanced technologies and continued licensing under the Telecommunications Act.

Whether the government accepts these proposals remains to be seen.

However, the broader issue is becoming increasingly important as Nepal prepares for the next phase of digital transformation.

The future of telecommunications will not be determined solely by the number of mobile subscribers or the size of voice and data markets. The sector will increasingly be judged by its ability to provide the infrastructure required for AI, cloud computing, fintech, smart services and a 5G-enabled digital economy.

In that context, the debate over Ncell’s future is also a debate over Nepal’s digital infrastructure strategy.

A clear regulatory framework, predictable investment environment and long-term technology roadmap could determine whether Nepal is able to attract the capital and expertise required to build next-generation connectivity.

For Ncell, resolving the current regulatory uncertainty could open the way for further investment in 5G and other emerging technologies. For the government, the challenge will be to ensure that any resolution protects the public interest, strengthens regulatory oversight and secures the long-term development of Nepal’s digital economy.

The outcome could ultimately influence not only the future of one of Nepal’s largest telecom operators but also the country’s readiness for the next era of connectivity.