Nepal Telecom's decision this week to finally resume pre-paid mobile service is seen here as the government's response to increasing public pressure and the threat of agitation by Telecom employees.

It could also have been an effort to deflect widespread coverage of the alleged link between restriction on mobiles imposed after the royal move on February First on security grounds and favouritism towards Nepal's first private mobile operator in which King Gyanendra's son-in-law has a share.

Of the 173,000 mobile phone lines that were cut off on 1 Feburary, only 40,000 post paid lines in Kathmandu, Pokhara and Biratnagar have been reconnected. Some 111,000 pre-paid mobiles were out of action for more than six months and Nepal Telecom has started activating about 12,000 of them per day in Kathmandu this week. Other 20,000 post-paid lines in Kathmandu and other metros are still out. Nepal Telecom has been allowed to issue only a limited number of new mobiles, and it has been forced to delay its plans to launch a CDMA wireless phone network in the Valley.

To be sure, as a government monopoly Nepal Telecom always treated its customers shabbily. Its technology was behind demand leading to poor service, high cost and lack of innovation. But employees of the company are convinced that post-February First the government was delaying full resumption of Nepal Telecom's services in order to favour Spice Nepal Pvt Ltd (SNPL) in which King Gyanendra's son-in-law Raj Bahadur Singh owns a stake. Spice Cell which is a joint venture with Kazakh and Cyprus-based companies with links to Russia-based Nepali billionaire, Upendra Mahato.

Spice was supposed to begin operations from July, but that deadline has been extended by three months. Its director, Ajeya Raj Sumargi, in an interview denied it is being favoured and in turn accused Nepal Telecom of being not responding to customer demand (see Business).

The Ministry of Information and Communications says Nepal Telecom's services have been cut for security reasons. But the army's public relations office says: "Any decision to reopen old services or new ones is up to the ministry and Nepal Telecom, we have nothing to do with it."

"On the one hand they have given Spice Cell another three months, but they have told us not to re-start our CDMA project till November," says Tanka Lal Shrestha of the Nepal Telecom Employees' Union, "this is a strategy to keep us out of the competition till Spice Cell comes into the market."

Nepal Telecom had to stop all mobiles from February to May, customers had to go through cumbersome re-registration, only 80 percent of Kathmandu's post-paid mobile were activated, pre-paid phones are being gradually put back, phones in other cities have still not been resumed.

Minister of Information and Communications Tanka Dhakal and the secretary, Lok Man Singh Karki, mysteriously failed to attend the launching of Nepal Telecom's CDMA wireless network timed for King Gyanendra's Birthday on 7 July. The very next day, Nepal Telecom's managing director, Sugatratna Kansakar said the launch of 75,000 new CDMA wireless phones had been postponed till November. There are 100,000 units of CDMA sets lying in storage at Birganj customs.

However, Karki (who is also chairman of Nepal Telecom) did attend the 'soft launch' of Spice Cell on 9 August and made a ceremonial call to NTA's Suresh Pudasaini on the Spice system. Indeed, the conditions under which the ownership of Spice Cell was transferred from the Khetan Group that originally won the bid in 2000 to the new joint venture partners has not been fully revealed, especially the Rs 2.2 billion royalty it was supposed to pay the government. Officials at the Nepal Telecommunications Authority declined to be interviewed for this article.

One official at the Ministry of Information and Communication told us: "Spice was obviously worried that Nepal Telecom would have captured 90 percent of the market with its new mobiles and CDMA even before it launched its service, and it used all its political clout to delay Nepal Telecom's plans." He admitted Nepal Telecom's monopoly had resulted in poor service to customers, but added competition must be clean and fair.

Nepal Telecom has always been one of the highest revenue earners for the state. It earned Rs 4.8 billion last year and pays Rs 80 million a year to the government to provide security to its microwave repeater towers. But Nepal Telecom has lost Rs 1.3 billion in expected revenue since 1 February.

One Telecom employee sums it all up: "The Maoists are blowing up our exchanges and repeater towers, and in the capital the royal regime is busy gobbling up our revenue and not allowing us to earn. As far as we are concerned, they are both the same."