New bill stirs telecom sector

A proposed amendment to the Telecommunications Act allowing the government to tap phone calls without prior court approval has raised a debate over the right to privacy. But two more provisions in the draft amendment bill have somewhat gone under the radar, and they could have a profound impact on the country’s telecom sector. If passed as it is, it will also dent significant revenue to the government.   

First is the removal of the provision where the assets of telecom companies with foreign investment of over 50 percent automatically come under government control after the expiry of their 25-year license duration.

Second is slashing of the licensing fees, royalties, and other charges. The draft of the Bill to Amend and Unify the Laws Related to Telecommunications, prepared by the Ministry of Communications and Information Technology, has already received an ‘in principle’ approval from the Cabinet, according to Netra Prasad Subedi, spokesperson at the ministry. 

According to industry insiders, some major private players in the telecom industry are set to benefit from the new provisions. The provisions related to the license fee and renewal fee in the draft bill will provide big relief to telecom companies struggling to pay government dues as well as new ones planning to enter the telecom sector.  

The draft bill has proposed cutting down the fees, royalties, and other charges that the government takes from telecom companies. At present, the fee for obtaining the license for a telecom company stands at Rs 350m. The proposed bill has reduced the fee for an integrated license to Rs 10m. It has also proposed to lower license renewal fees.

As per the existing law, a new telecom company must first renew its license after 10 years and then after every five years by paying a fee of Rs 20bn.  In the draft of the proposed bill, the license renewal fee has been revised to Rs 10m or 10 percent of the company’s total income, whichever is higher for every year of the first five years.  Similarly, a fee equal to Rs 250m or 10 percent of the total income of the company, whichever is higher, will have to be paid every year to the government from five to 10 years after obtaining the permit.  After 10 years, the telecom company has to pay Rs 2bn or 10 percent of the total income earned that year, whichever is higher.  Telecom experts say the new renewal fee proposed in the draft bill will make no difference to existing players—Nepal Telecom and Ncell.

As both companies’ annual income is around Rs 40bn, they have to pay 10 percent as license fee, which is around Rs 4bn every year. This is in line with the current provision that Rs 20bn is to be paid in five years.  However, the government will lose huge revenue from the companies that have been currently holding licenses but not doing substantial business.  The state will lose Rs 347.5m as license fees from a telecom company from now onwards.

Similarly, the state would have received Rs 20.13bn from each telecom company in the first 10 years and the same amount in every five years for the next 15 years. Similarly, Ncell Limited, a subsidiary of Malaysian multinational telecommunication conglomerate, Axiata Group Berhad, could also be a direct beneficiary of these proposed amendments.  Ncell’s license was issued on 1 Sept 2004 in the name of Spice Nepal, and it will expire on 1 Sept 2029. According to the existing law, the company is set to come under government ownership after six and a half years.

However, Ncell has been lobbying for amendment to the existing law so that it could renew its license even after its expiry.  As per the draft bill, companies already holding licenses for cellular mobile, basic telecommunications, and rural telecommunication services can apply for integrated licenses within one year of the implementation of the amended Act. 

 

Subedi, the spokesperson at the Ministry of Communications and Information Technology, says though the government has given ‘in principle’ approval to the draft bill, there is still room for further improvement. He adds that the provision related to the government taking control of the assets held by telecom companies with foreign investment can be further discussed and improved upon. 

The draft bill also proposes that telecom companies can operate for as long as the frequency is available, which overrides the existing law requiring telecom firms to get frequency separately after acquiring the operating license. So, any company capable of getting frequency can obtain a license to operate telecommunication services.

Subedi says the draft bill has proposed charging royalties and other fees based on the company’s income. Rather than reducing the fees, he explains the proposed provision is aimed at charging the telecom companies based on their income.