December 1: Malaysian telecommunication conglomerate Axiata Group Berhad on Friday announced that it had entered into an unconditional agreement with Spectrlite UK Limited for the sale of its stakes in Ncell, its mobile service unit in Nepal.
According to Reuters, Axiata will sell stakes in Ncell for a fixed consideration of US$ 50 million.
Reynolds Holding Limited, a subsidiary of Axiata Group, owns approximately 80 percent equity stake in Ncell. The company plans to sell the shares owned by Reynolds Holding citing unfair taxation and regulatory uncertainties in Nepal.
“The Group’s decision to withdraw from Nepal is based on a thorough evaluation of the prevailing business environment in Nepal, which led to the conclusion that continuing operations under the current conditions of unfair taxation and regulatory uncertainties was no longer sustainable for Axiata,” reads a statement issued by Axiata.
Axiata entered the Nepal market in 2016, following the acquisition of Reynolds for the purchase price of USD 1.365 billion, effectively securing an 80 percent equity interest and controlling stakes in Ncell.
The statement added that Ncell had settled a total of Rs 47.0 billion (approximately USD 421.9 million) in capital gains tax (CGT) between 2016 to 2020 as full and final liability under Nepalese law and received confirmation from Large Taxpayers Office of Nepal (LTPO) in April 2020 that no further taxes remain in relation to the acquisition of Reynolds Holding in 2016.
Despite the payment of CGT, Ncell was further assessed in January 2021 by the LTPO under Section 57 of the Income Tax Act of Nepal for a sum of approximately Rs 57.9 (approximately USD 433.6 million) for the same transaction, added Axiata.
“Collection on this assessment by the tax authorities has thus far been suspended due to an interim order issued by the Supreme Court of Nepal based on Ncell’s petition disputing the applicability of the assessment,” reads the statement.
Axiata further claimed that the government authorities in Nepal imposed capital gains tax on Ncell and Axiata after Nepal’s efforts to collect tax from the seller (TeliaSonera) failed.
According to the statement issued by Axiata, the international arbitration proceedings filed by Axiata to the International Centre for the Settlement of Investment Disputes (ICSID) concluded on June 9 , 2023 delivering its verdict that Nepal should refrain from demanding any further tax, fees, penalties or interest in relation to the acquisition of Reynolds Holding in 2016 and, in particular, that Nepal should refrain from enforcing the January 2021 Assessment.
Axiata’s exit from Nepal comes at a time when the Government of Nepal has been pledging foreign investors to invest in Nepal promising a conducive environment for doing business in the country, which is in stark contrast to the reality.