Kathmandu: The report submitted to Prime Minister Pushpakamal Dahal ‘Prachanda’ by the committee led by Former Auditor General Tanka Mani Sharma on Monday has brought to light significant findings and presented key recommendations concerning the Ncell controversy. The committee led by Sharma presented its findings on Monday regarding the intricate financial and legal complexities surrounding Ncell. Here’s a comprehensive breakdown of the key revelations:

Legal Challenges at Various Levels:
The report underscores ongoing legal deliberations at various levels, revealing the depth of the legal challenges faced by Ncell in different arenas, including courts.

Axiata’s Lucrative Returns in Nepal:
The report discloses that Axiata Berhad, Ncell’s parent company, reported a substantial profit margin in Nepal’s telecommunications sector compared to other countries. This revelation raises questions about the attractive profits amassed by Axiata in Nepal, leading to a significant announcement by Axiata in December 2023. A statement alleging an unfavorable business environment in Nepal accompanied the announcement, though it lacked factual evidence.

International Legal Tussle:
Axiata escalated the dispute by filing a claim with the International Center for Settlement of Investment Disputes (ICSID) Tribunal. The report outlines the accusation that Nepal violated legal expectations. However, the Tribunal’s decision indicates that no evidence supporting Axiata’s claims has been found, dismissing the alleged violations.

Share Transaction Controversies:
Axiata’s acquisition of Ncell shares from Varhad and Spectralight UK is scrutinized in the report. The committee notes concerns regarding adherence to the Arm’s Length Principle and allegations of unfavorable terms. Despite this, the legal standing of the transaction remains unscathed.

Lack of Transparency in Business Dealings:
The report highlights the Ncell Group’s business dealings in December 2023, specifically the share purchase and sale agreement. It questions the adherence to the Arm’s Length Principle, suggesting that the seller-side imposed more favorable terms. The report indicates that the company failed to provide clear evidence of such natural allegations, leading to a lack of substantiated claims.

Financial and Operational Viability Concerns:
The annual profits garnered by Ncell in Nepal’s telecommunications sector are emphasized in the report. However, concerns loom over the company’s financial viability, operational practices, and its capacity to manage extensive financial responsibilities while serving a vast customer base of millions.

Recommendations for Rectification Measures:
The committee suggests specific measures for rectifying the identified legal, financial, and operational issues within Ncell, aiming to restore transparency and adherence to legal norms.

Strengthening Regulatory Oversight:
To prevent future controversies, the report suggests enhancing regulatory oversight and introducing measures to ensure telecom companies operate within the legal framework and maintain ethical business practices.

Industry Impact Assessment:
Acknowledging the broader implications on Nepal’s telecom sector, the committee recommends a comprehensive impact assessment to gauge the repercussions of the Ncell controversy on the industry and devise strategies for sustainable growth.

Summary of Ncell’s Business Practices:
The report provides a holistic summary of Ncell’s business practices, emphasizing the need for improved transparency, adherence to legal standards, and ethical conduct within the telecommunications sector.

Committee’s Recommendations:

1. The analysis in various sections of the report reveals that both the buyer and seller, based on legal scrutiny, have not submitted necessary documents before seeking approval for share transactions, and the conditions of the share purchase agreement have not been thoroughly examined according to the Arm’s Length Principle. Failure to provide evidence of the buyer’s technical, financial, and managerial capacity, as well as the lack of transparency in the terms of the share purchase agreement, raises concerns about its acceptability in its current state.
2. Despite most of Ncell Asia’s share transactions being subject to prevailing laws and prior approval obtained from relevant authorities, the lack of a lawfully approved Share Purchase Agreement (SPA) for the majority of the share transactions involving Axiata Group Berhad, Malaysia, and SpectraLite UKV2 raises concerns. It is recommended to submit the SPA for legal approval, considering the buyer company’s technical capacity, investment sources, the business background of the company’s executives, the status of Cross Holding, regulations on foreign investment in Nepal’s telecommunications sector, sensitivity of telecommunications services, assurance of service operation, and future plans for service operation. The relevant facts and court orders related to these aspects must be thoroughly examined.
3. With the expiration of the 25-year period of the foreign individual or entity holding more than 50% investment in telecommunications-related assets, buildings, equipment, and structures in Nepal after the enactment of the Telecommunications Act, 2053, ensuring the ownership by the Nepalese government is crucial for the security of these assets. Therefore, necessary conditions must be established.
4. Investigation should be conducted into the financial irregularities, currency repatriation, and property cleansing of various businesses conducted transparently or non-transparently through various companies during the acquisition of shares in past Axiata companies in Nepal and abroad.
5. Considering the occurrence of significant and serious economic scandals in Nepal, a separate institution, similar to an independent commission, should be established to investigate and prevent such events.
6. Financial institutions involved in providing funded and non-funded loans to telecommunications service providers in Nepal should conduct a financial risk assessment, and the Nepal Rastra Bank should immediately conduct a tax audit of Axiata Asia and other concerned parties.
7. Following the implementation of the Telecommunications Act, 2053, addressing the development in Nepal’s telecommunications and information technology sector, restructuring the relevant bodies for an increase in regulatory capacity, and amending laws and other related laws to enhance transparency and attract foreign investment in the telecommunications sector are necessary.
8. Improvements in corporate governance, regulation of debentures, prevention of property cleansing, enhancement of foreign investment, effective regulation of the banking and financial sector, transparency promotion in foreign currency business, and making Nepal an attractive destination for foreign investment require policy, legal, institutional, and procedural reforms in the respective sectors.