Money
We have invested over Rs80b; we are here to stay
The market has been set abuzz after TeliaSonera, the majority shareholder in telecom giant Ncell, decided to pull out from Nepal.The market has been set abuzz after TeliaSonera, the majority shareholder in telecom giant Ncell, decided to pull out from Nepal. People are curious about how Ncell will approach the Nepal market in the days to come. Also, as the Swedish-Finnish company prepares to leave, a number of stakeholders have raised varied questions. Sanjeev Giri spoke with Ncell’s Chief Executive Officer Erim Taylanlar about the company’s post-TeliaSonera prospects. Excerpts:
How have things changed at Ncell after TeliaSonera’s decision to leave Nepal?
It’s been around a month that the official announcement was made regarding the interest shown by Axiata in buying Ncell shares. In September last year, TeliaSonera had made an announcement that a strategic decision was made, and that the company would eventually move out of seven countries including Nepal. In an ironic way, we feel proud that Ncell is the first one to go because when you put something on the market, it’s the best one that goes first. We have been quite excited to see the level of interest in Ncell. Of course, it has not been an easy time for us. From September onwards, we have been hearing rumours and expectations in the company among the employees. This affected work for some time. However, we have got over that. For us, it is business as usual. Once you have information flowing correctly, ambiguity goes away.
You mentioned the expectations of the employees. How is the morale of Ncell employees after TeliaSonera decision?
It is very normal and human for all of us to be stressed under certain conditions. Now, we have to overcome that. We know the potential buyer now. Axiata is a substantial operator in Asia, and I believe the company is going to be yet another good shareholder for Ncell. We are making sure that nothing reflects on our consumers in a negative way based on this. And thus we are putting heavy emphasis on clarifying to our employees that it is business as usual for us, and we have been keeping customer concentration as a primary item. This required dedicated and intense communication on a daily basis informing our employees in which direction the change was going.
Some high-level officials of TeliaSonera and Axiata had visited Nepal last week. What was the main purpose of their visit?
It was more an introductory meeting for the two management teams. Besides, the chief executive officers of TeliaSonera and Axiata had some high-level meetings. This was the first interaction of the two companies at the management level. At the shareholder level, there was an interaction lasting for quite some time.
The Ministry of Informa-tion and Communications, Nepal Telecommun-ications Authority (NTA) and Nepal Rastra Bank have been saying that they are unaware about the proposed sale of TeliaSonera’s stake in Ncell to Axiata, specifically the transfer of 80 percent of the shares. Is this because it is an offshore deal?
First, what needs to be made clear is the level of Ncell in relation to operations here and shareholding which is above it. Hence, this is a question for our shareholder TeliaSonera or most likely shareholder Axiata. I don’t want to comment much on that. But since you have already mentioned that the 80 percent is an offshore transaction, I would assume that the shareholders view it the same way. On my pa- rt, I can only say this is largely a matter for the shareholders, and they will deal with it themselves.
The deal between TeliaSonera and Axiata is expected to be concluded by mid-2016. This has created a lot of curiosity in the market regarding the company’s investment plan in Nepal.
There are two aspects to the closure happening—there needs to be the approval of the authorities in Nepal and Malaysia [where Axiata is based]. So the first half of 2016 is the expected time frame. Since this is the largest ever transaction in Nepal, a lot of people are focused on that big figure. What I want to bring to attention is that Ncell is a company established in Nepal, and it is here to stay. Bringing some facts and figures in perspective, so far Ncell has invested over Rs80 billion in the business. So, needless to say, according to our operational licence, this is investment to stay in this country.
Since Ncell was established here, it has contributed over Rs120 billion in taxes, fees and rural development funds, among others. And we will continue paying it. For two consecutive years, we were the largest taxpayer. We employ over 500 employees, and together with the outsourced employees, we actually touch around 2,000 employees and provide income to their families. Ncell’s contribution in Nepal in taxes and income for the treasury only is close to or around 1 percent of the Gross Domestic Product (GDP).
When you look at the economic contributions we have made in the country, we can easily talk about around 2 percent of the GDP. Every year, we are investing in the range of around Rs9-10 billion. We will do the same this year. We will continue expansion. We will continue expanding 3G presence. We are ready to move to 4G when the NTA and the ministry go forward with the licensing preparations. In 2015, we expanded our Kathmandu network significantly. Hence, we can provide up to 21 mbps of data speed. We have seen our data traffic picking up significantly, and we intend to do the same in other parts of the country eventually.
Ncell had made a commitment to provide around Rs1 billion over three years as part of its corporate social responsibility (CSR) initiative to the earthquake survivors. Will this commitment be affected following changes in the shareholding structure?
It is an Ncell commitment, and there will be no alteration to it even after Axiata comes in. Axiata will also honour it as the commitment of Ncell.
You told a recent meeting of the parliamentary Development Committee that Ncell services might be disrupted due to the unavailability of power. What is the situation now?
We are struggling on a daily basis to meet the requirement as the supply of electricity is extremely important for our business. Following the earthquakes in April and May last year, we were lucky to have a dedicated feeder into our data centres. However, the provision was recently cancelled without informing us. We are not buying fuel on the black market and are dependent on supplies from Nepal Oil Corporation (NOC). We have informed all the ministries concerned about the issue. We are still discussing the matter and trying to convince the importance of it. Telecommunication service is not just about a matter of consumers but also a matter of national security, and I am sure nobody wants to see an interruption in the telecom service of any company. The issue has not yet been resolved. Hopefully, we will be awarded with a dedicated feeder soon.
The issue of the repatriation of Rs11 billion in dividends has been around for a couple of years now. Nepal Rastra Bank has said that Ncell has not been able to show the details of investments amounting to Rs20 million which is why TeliaSonera has not been able to repatriate the money. For a company like Ncell, which obviously has a very good data management system, why is it taking so long to submit the documents?
This is again a question for TeliaSonera. So I would choose not to answer it in depth. I will repeat what a TeliaSonera official had said at the parliamentary committee meeting. I think he was very clear that if you have missing documents, the government is there to stop you, if necessary. But that is not the case. And what TeliaSonera has raised is whatever document is claimed to be missing, Ncell will put that together at the soonest. In fact, that is exactly what we are doing this week. I don’t think this is a big issue. The dividend issue is a shareholders’ matter, and you can put further questions to them.
We hear that the central bank has barred your company from making payments abroad. What is the issue?
We have a lot of imported services and products, and we have to make overseas payments which are in foreign currency. As part of our operational standards, we have provided documents to authorities including the Ministry of Information and Communications, Nepal Telecommunications Authority and Nepal Rastra Bank. Currently, we have some documents stuck at the central bank which is quite surprising as there is nothing wrong with the documentation. We are not receiving any answer regarding why it is stopping this payment.
Did this happen after Teli-aSonera announced that it would be leaving Nepal?
Let’s say it has escalated after the announcement. Previously, we would submit a set of documents, and they would be approved in course of time. However, it is not the case this time. Such delays might affect subscribers as some of the payments are related with important products and services. If we don’t make timely payment, we might not receive that service which will impact 13 million Ncell subscribers.
Ncell has become a billion-dollar company in around a decade. What does this mean for a foreign investor?
I think the size of the business is a very clear indication of how much foreign direct investment (FDI) can contribute to society from a commercial point of view besides the social aspect. As long as Nepal is open to FDI, I think there are significant opportunities in the country for any other FDI to come to the country. Ncell is a very good example for any foreign investor looking forward to stepping in here.
Do you think that this fact will also attract more international telecom operators here?
We hear that the authorities are keen to have one or two more international telecommunication operators. We are picking up the signals. As for Ncell, we are open to competition. Customers will ultimately choose the better service provider. Hence, we are quite okay with competition.