On 1 November the independent Nepal Telecommunications Authority (NTA) will auction off a business licence to set up the country's first private cell-phone network that could finally bring consumers cheaper and more efficient mobiles. Six companies have pre-qualified for the final round of bidding: among them are joint ventures with one Turkish, one Singaporean, and four Indian partners.
The Khetan Group is teaming up with India's Modi Telestra (MTL) and is also backing Turkey's Rumeli Telekom. Nepal Venture P Ltd (backed by the promoters of the Nepal Industrial and Commercial Bank) is going along with India's United Telecom, Videsh Sanchar Nigam Limited and Mahanagar Telephone Nigam Limited.
Four Nepali business houses (ICTC, the Jyoti Group, the Golchha Group, and Continental Trading) are behind India's Bharati Telecom. The Mercantile Group is working with India's BPL Broadband Networks. A company by the name of Nepal Holiday is bidding with Singapore's Millicom International Cellular (Asia) P Ltd. Whoever wins the bid will have to begin service within nine months.

The auction is straightforward-there is theoretically no chance for underhand deals by ministers and no backroom negotiations. This also means consumers don't pay for political corruption and commissions on equipment supplies, all of which are usually passed on to consumers and contribute to unnaturally high tariffs and other inefficiencies.

All eyes are on the NTA auction. How properly it is handled will be seen as a pointer to future privatisation schemes of the entire telecom sector. Licensing of mobile telephone service using the GSM-900 technology is part of the government's efforts to privatise and deregulate service sectors.
The government-run Nepal Telecommunication Corporation (NTC) still laps up all bilateral loans for rural telephony. Earlier this month it received a Belgian government loan for a village phone network for an initiative similar to the upcoming NTA auction. Such bilateral deals are the least transparent, and, say development experts, provide wide opportunities for graft and come tied with equipment purchase and consultation contract guarantees. In the case of the Belgian loan Alcatelbell would be the most likely supplier. Interestingly, the Prime Minister visited the Alcatel headquarters in Antwerp on his way to the UN millennium summit last month.
It took the NTA nine months to get to the financial bidding stage. But despite prolonged delays-which even led some multilateral lenders to threaten to put potential projects on the back-burner-participating businesses have few complaints. "The road from here is more important, we don't know how level the playing field is going to be," said one.
The message of the mobile licensing experience is that despite endemic corruption, Nepal can make fair and transparent decisions when there is a straightforward law and professionals with integrity-not politicians-are in charge of decision-making. "Generally, the government has been cooperative," says Bhup Raj Pandey, NTA Chairman. His job has not been easy because the autonomous body's transparent methods have forced greedy politicos to salivate on the sidelines.
Pandey told us there were times when interference and pressures to bend rules got so intense that he nearly resigned. "I've told myself that as long as I'm here I will go only by the telecom policy and law," he said. "I may still have the draft of my resignation letter somewhere with me."
NTA's transparency is in sharp contrast to what goes on at its parent ministry. A classic example is of FM radio licensing in which the ministry has made numerous ad hoc decisions and emerged unscathed-unnoticed even by agencies like parliament's public spending watchdog.
The Ministry of Information and Communication has had occasional bouts of honesty, but even these are suspect, such as its recent advertisement seeking proposals from companies wanting to launch terrestrial television. The notice appeared in the government's English daily on 1-3 October and gave interested parties just 35 days to submit applications accompanied with detailed project studies, including network, construction, financing and programming policy and plans. With two weeks off for Dasain, this was suspiciously short notice for such a large and complicated bidding. One source told us: "How could you expect anyone to prepare a proposal for a $50-60 million project within two weeks?" When we last checked with the ministry on Monday, there hadn't been a single application.
An NTA notice seeking proposals for a rural telecom network in east Nepal that appeared in the papers the same week was in sharp contrast to the Ministry's advertisement. The NTA posted the entire tender document on its website, with a clear explanation of how the licensing process works: the plan is to award the contract to the company seeking the lowest subsidies.
The frightening part of the current bidding process is that even after the results of the 1 November auction are announced, the winner will still have to deal with the Ministry. "We'll have to go there for frequency allocations and other support," rues one businessman.
The minimum the bidders can quote for the licence is Rs 20 million and the minimum for renewal after 10 years is Rs 18 million. (The licence can be renewed for a total of 25 years.) The licensee will also have to pay a 4 percent royalty on turnover and another 2 percent as contribution to the Rural Telecommunication Development
Fund. There is
also an annual frequency fee in addition to all customs duties and associated taxes, payable after actual commissioning of the service.
So far so good, but what remains to be seen is how the NTA and the government work to create fair competition when the really big reforms get underway-breaking the NTC into smaller companies that provide different services, and maintaining separate accounts to prevent it from cross-subsidising tariffs.