Recommendation for In-depth Investigation on Ncell Share Ownership Transaction

The Study and Investigation Committee on Ncell Axiata share purchase and sale, 2080 has suggested that the relevant authorities should investigate issues related to revenue leakage, foreign exchange embezzlement and money laundering over what is called, opaque transactions in Nepal and abroad, in Ncell’s past share and ownership transactions.

The government on Tuesday decided to make public the report of the Committee, and implement its recommendations. The committee formed under the coordination of former Auditor General Tanka Mani Sharma Dangal states that Ncell Axiata has purchased and sold shares and ownership 14 times since its establishment as Spice Cell Pvt. Ltd. in 2058 BS.

The committee concludes that most of these transactions were made through offshore structures outside Nepal and that all the records and details related to them were not submitted to the relevant official authorities of Nepal.

Even the payments for the transactions of some Nepali shareholders were made abroad and not through the Nepali banking system.

The committee concludes that the process of converting the company into a public limited company by selling 11 shares to seven employees of the company on 19th Shrawan 2077 did not seem natural.

The committee’s report also concludes that the Ncell share purchase and sale agreement signed between Axiata Group Berhad Malaysia and Spectralite UK on December 1, 2023 was made without prior approval required before share transactions as per prevailing Nepali law.

The committee has also raised the issue of potential economic interests and cross-holding between Ncell and Smart Telecom. It concludes that there may be a relationship of economic interests between the shareholders of Ncell and Smart Telecom. The report mentions that cases are pending in various courts and bodies regarding more than Rs 85 billion in taxes and non-taxes owed by Ncell to the Government of Nepal.

The report states that the transaction value of the company, which earns billions of rupees annually even after paying taxes, does not match the public statements. The committee concludes that the share purchase agreement between Axiata and Spectralite does not appear to be real and realistic.

The committee suggests the government not to accept Ncell’s latest share purchase agreement as it stands.

According to the law, both parties are required to submit an application to the relevant body, but such an application was not made, the approval required before the share purchase and sale was not obtained, and the terms of the agreement were not in accordance with the terms of the agreement.

It also suggests that necessary decision should be taken after studying the regulation of foreign investment in Nepal’s telecommunications sector, the sensitivity of telecommunications services, the assurance of service operation, future business plans, the impact on the foreign investment environment, the legal compliance of the parties so far, the accuracy of the terms of the agreement, the transparency of the transaction and the reliability of the price, and court orders.

The report has suggested implementing a system to ensure the ownership of the Government of Nepal in the property, buildings, machinery and equipment related to telecommunications services after the expiry of the 25-year period of the license, based on the provisions of Section 33 of the Telecommunications Act, 2053. The government should ensure such ownership by imposing necessary conditions in the upcoming license renewal.

The Committee’s report also covers issues such as ownership changes since the company’s inception, offshore transactions, dividend flows, tax and non-tax liabilities, foreign investments, regulatory compliance, potential cross-holdings, transaction values, and international disputes. (RSS)