December 3: Malaysia's telecommunication conglomerate Axiata Group, which bought Ncell's shares for USD 1.38 billion (about NPR 143 billion) in 2016, sold its shares seven years later at a throw-away price of USD 50 million (about Rs 6.68 billion according to Friday’s exchange rate), raising quite a few eyebrows.
It seems that the purchase and sale of Ncell’s share will court controversy.
The Malaysian company has cited lack of working environment in Nepal for its decision to exit Nepal while the government officials suspect that selling a profitable company at a much lower price than the purchase price may be for ‘tax evasion’.
Nepal Telecommunication Authority has sent a letter to Axiata telling the company that it did not acquire permission to sell the shares of Ncell.
After the news of Axiata's withdrawal from Ncell became public, the authority had written to Ncell on Friday to follow legal procedures to sell its stakes in the company.
According to NTA, Rule 14 of the Telecommunication Regulations 2054 states that a telecommunication service provider company must obtain approval from the authority when transferring share ownership. Axiata has not revealed anything about this issue.
Aziata said it has sold 80 percent of Ncell's shares to Spectrlite UK Ltd, a company registered in the UK. Axiata has informed that Spectrlite UK will receive USD 5 million (about Rs 668.1 million) from the sale of shares in six months and the remaining amount after 48 months. Spectrlite UK has expressed its pleasure to purchase the shares of Ncell. The company director Satishlal Acharya stated that Spectrlite UK is happy to announce the agreement for the acquisition of Ncell's shares and said that it will work with Ncell's management to use its experience in the telecommunication sector for innovation, investment and to provide services to the Nepalese people. Acharya is a citizen of Nepali origin living in Singapore. Sunivera Capital Ventures already has a 20 percent stakes in Ncell. Acharya is the director of Sunivera Capital Ventures. With the involvement of Spectrlite UK, Acharya now owns 100% shares of Ncell.
Axiata bought the ownership of Ncell in 2016 from the Swedish company TeliaSonera. At that time, Ncell was valued at around Rs 143 billion. Ncell's license period is expiring in 2029. According to the agreement between Axiata and Spectrlite UK, Axiata will receive the dividend received by Ncell until 2029.
Ncell's net profit was Rs 5.16 billion during the last fiscal year (FY) when the operating income was Rs 39.72 billion. In the year 2023, Ncell has earned more than Rs 37.44 billion (unaudited report).
Government officials have been critical towards Axiata’s decision to sell a profit-making company at a scrap value.
The statement issued by Axiata states that if the government claims any taxes from Ncell in the future, it will be borne by the buyer Spectrlite UK.
A corporate law expert argued that Axiata may have decided to exit due to the double taxation of Ncell and the risk of the company's license expiring by 2029.
Axiata claimed that the government imposed taxes repeatedly and complying with the regulation meant the company was subject to double taxation.
Axiata said it paid Capital Gains Taxes or Rs 47 billion for the purchase of 80 percent of Ncell's shares in 2016 although the seller was liable to pay the amount. Axiata claims it fulfilled all its tax obligations to the Government of Nepal as per the law.
However, the Large Taxpayers Office has determined an additional tax of Rs 57.90 billion for Ncell. Not satisfied with this, Ncell has filed a writ in the Supreme Court. The matter is sub judice.
It is mentioned in the statement issued by the company that Ncell has contributed greatly to the economic and social development of Nepal. The statement also mentions that Ncell has directly and indirectly provided employment to 25,000 people and served 17 million customers.