20-26 June 2014 #712

Nepal Telecommunication Lack-of-Authority

The expansion and upgrade of mobile phone services is stuck because of regulatory failure
Ramesh Kumar

After initial rapid progress following the entry of an international mobile operator 10 years ago, the development and spread of Nepal’s telecom infrastructure has ground to a halt because of a weak regulator and political interference.

Nepal Telecommunication Authority (NTA) is supposed to be an independent government regulator in charge of renewing licenses, allocating frequencies, deciding on mergers and acquisitions, negotiating with foreign investors and monitoring cross-holdings.

However, a Supreme Court decision two years ago barring Chairman designate Digambar Jha from taking any decisions has left the NTA leaderless and rudderless. Jha was appointed by previous Communication Minister Rajkishore Yadav, but was accused of not being qualified for the job.  “Let alone policy rulings, the NTA hasn’t even been able to take day-to-day decisions,” says former NTA Chairman, Suresh Kumar Pudasaini.

Regulatory paralysis has impacted service providers like Nepal Telecom (NT) and Ncell which applied for 4G licenses three years ago. Ncell has been waiting to spread its 3G service nationwide but the NTA has given it neither a ‘yes’ nor a ‘no.’ Customers have also been affected because the NTA hasn’t been able to decide on telecom tariff adjustments.

Trade industry insiders say politicians and bureaucrats in the Ministry of Information and Communication (MOIC) would prefer a weak NTA so they can take over its regulatory functions, make policy decisions, as well as appoint a crony as its new head to favour the politically connected.

In the past, no NTA chairman has been able to complete his term because of political interference from the ministry. There is also a conflict of interest because the MOIC secretary is also on the committee to select the NTA chairman and board of directors.

The MOIC renewed NT’s license this year without stipulating its license fee and payment term. According to current regulations, NT should have paid Rs 20 billion for a five-year license renewal, but it only paid Rs 180.9 million. This sets a precedent and Ncell may also not have to pay Rs 20 billion when its license expires in September. “It’s clever of the service providers to avoid paying the Rs 20 billion license renewal,” says former NTA Chairman Bhesh Raj Kandel.

Service providers deny they are colluding, but say it should be a level playing field. They are not happy with delayed decisions and indecisions on their proposals for expansion and upgrading. For example Ncell is still waiting to hear from NTA on its Unlimited Call Campaign which it says would benefit customers.

Three years ago NTA unveiled a new frequency distribution and pricing policy under which Smart Telecom paid Rs 370 million to get a unified license, while Indian-owned UTL is waiting and watching. Renewal of a unified license is set at Rs 20.13 billion, with provisions for auctioning off 4G licenses, but all this is at a standstill because of the absence of an executive.

The future of telecom development in Nepal, as elsewhere in the region, is in data as more and more people upgrade to smartphones. Operators know this, and are in a hurry to improve bandwidth and technical capacity.

The rural telecom fund has accumulated Rs 7 billion from a two per cent tax on the operator profits. This was supposed to be used to upgrade and expand services in remote areas, but it is in limbo. Ncell has not been able to repatriate dividend worth Rs 360 million to its overseas shareholders because of the lack of Central Bank clearance, and this has made it think twice about plans to invest a further $100 million to expand and upgrade its service.

All this is making foreign investors wary, not just in telecom but also in other infrastructure projects, about putting money into Nepal.  Still, Smart Telecom proposes to use its unified license to partner with a foreign telecom company. Arun Sumargi of Hello Mobile is also wooing a foreign partner after it upgrades to a unified license.

NT is working to appoint a new foreign partner from among eight bidders, and STM Telecommunication Inc has also applied for a unified license after the Chaudhary Group bought 80 per cent share in the company that is presently concentrated in eastern Nepal.

Read also:

Expanding the net, Ayesha Shakya

Interview with Johan Dennelind, CEO of TeliaSonera, the Swedish-Finnish parent company of Ncell

Banking on cell phones, Paavan Mathema

Mobile towers row heats up, Naresh Newar

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