Ncell Share Transaction Under Scrutiny: High-Level Probe Uncovers 'Suspicious' Deal and Regulatory Lapses

The recent submission of a high-level investigative report into the controversial sale of an 80% stake in Ncell, Nepal's largest private telecommunications company, has sent ripples through the nation's corporate and regulatory landscape. Chaired by former Auditor General Tankamani Sharma Dangal, the committee's findings have unequivocally labeled the transaction as "unrealistic, opaque, and suspicious," casting a significant shadow over the integrity of the state apparatus and raising critical questions about foreign investment practices in Nepal.

The controversy ignited on December 1, 2023, when Malaysian telecommunications giant Axiata Berhad announced its decision to divest its 80% ownership in Ncell to Spectrlite UK, a company owned by Satish Lal Acharya. This announcement immediately sparked widespread concern and led to the formation of the investigative committee. The report concludes that this transaction was not merely a commercial decision but rather a calculated maneuver designed to circumvent Nepalese law and potentially evade billions in state revenue.

A central and most alarming aspect highlighted by the report is the drastic and inexplicable valuation discrepancy. In 2016, Axiata acquired the 80% stake in Ncell for a staggering USD 1.36 billion. However, a mere seven years later, the same stake was purportedly sold for a paltry USD 50 million, equivalent to approximately NPR 6.5 billion. The committee explicitly states that this transaction violates the 'Arm's Length Principle,' which dictates that transactions between related or independent parties should be conducted at market value. "The more than 95% depreciation in the value of a company that traded for billions of dollars in such a short period is unrealistic and suspicious," the report asserts. This dramatic undervaluation has severe implications for the capital gains tax revenue that the government stands to collect.

Furthermore, the investigation uncovered a complex web of 'offshore' transactions employed in the Ncell share sale process. The report suggests that by registering companies in various foreign countries, including known 'tax havens,' there was a deliberate attempt to bypass Nepal's tax laws. The committee expressed significant financial risk in entrusting a colossal company like Ncell to Spectrlite UK, a recently registered entity with no discernible financial background or operational history.

The regulatory oversight, or lack thereof, is another critical point of contention. Nepal's Telecommunications Regulations mandate prior approval from the Nepal Telecommunications Authority (NTA) for any share transaction exceeding 5%. Yet, Axiata proceeded with the offshore share transfer without informing the NTA, a move the report unequivocally identifies as a direct violation of Nepal's Telecommunications Act 2053 and Regulations 2054. The report criticizes the NTA for its inability to monitor such large-scale transactions and its failure to take decisive action against foreign investors who disregard Nepalese law, hinting at a systemic breakdown in policy enforcement under the guise of attracting foreign investment.

Adding another layer of complexity, Ncell's license is set to expire in 2086 BS (around 2029-2030 AD), after which, according to regulations, the company's ownership is likely to transfer to the Nepal government. The investigative committee suspects that this recent share transaction might be a strategic ploy to prevent or complicate the government's acquisition of ownership in 2086 BS. The report strongly advises the government to clarify its legal standing immediately and develop a clear action plan for assuming ownership of the company post-2086 BS.

The committee's recommendations are robust and far-reaching:

1. Detailed Investigation: Given serious suspicions of money laundering and foreign exchange misappropriation, further meticulous investigation by the Department of Money Laundering Investigation and the Department of Revenue Investigation is crucial.
2. Act Amendment: The Telecommunications Act, 2053, must be amended immediately to make provisions for share transactions, license renewals, and ownership transfers more transparent and robust.
3. Tax Collection: The capital gains tax, which was sought to be evaded through unrealistic valuation, must be rigorously assessed and collected based on the actual market value.
4. Regulatory Restructuring: The capacity of the Nepal Telecommunications Authority needs to be enhanced, and it must be empowered as a strong, independent regulator free from political interference.

The investigative report frames the Ncell case not merely as an issue concerning a telecommunications service provider but as a litmus test for Nepal's tax system and the rule of law. Axiata's exit and Spectrlite's entry have starkly exposed potential policy corruption under the guise of foreign investment in Nepal. The future trajectory of Nepal's capital market and telecommunications sector now hinges on whether the government chooses to act decisively on this report or allow it to gather dust. Only through strict implementation of these recommendations can billions in potential revenue be secured and similar 'collusive' transactions be prevented in the future.