KATHMANDU: After more than two decades as one of Nepal’s largest telecommunications operators, Ncell now finds itself at the center of one of the country’s most consequential policy and legal disputes. What initially appeared to be a disagreement over a telecom license renewal, foreign share transfer, and regulatory approvals has evolved into a far broader national issue-one that now tests Nepal’s commitment to policy stability, the rule of law, protection of foreign investment, the future of Digital Nepal, and uninterrupted connectivity for more than 14 million mobile subscribers.
The outcome of the Ncell case will not merely determine the future of a single telecommunications company. It will also signal how Nepal treats long-term foreign investors, interprets investment laws, balances regulatory authority with commercial certainty, and safeguards critical digital infrastructure that has become indispensable to the country’s economy.
From a corporate dispute to a national policy debate
The Ncell controversy is no longer simply a corporate disagreement. It has become a benchmark for Nepal’s investment climate, regulatory credibility, and digital transformation agenda.
For nearly 21 years, Ncell has played a major role in expanding modern mobile communications across Nepal. The company says it has extended 4G coverage to more than 95 percent of the population and currently serves over 14 million customers nationwide.
Today, virtually every sector of Nepal’s economy relies heavily on mobile connectivity. Digital banking, mobile wallets, online education, telemedicine, e-government services, e-commerce, logistics, emergency communications, and everyday business operations all depend on stable telecommunications infrastructure. Against this backdrop, uncertainty surrounding the company’s ownership, operating license, and future has implications extending well beyond the telecommunications industry.
Over the past two years, Ncell has repeatedly written to the Office of the Prime Minister and Council of Ministers, the Ministry of Communication and Information Technology, the Nepal Telecommunications Authority (NTA), and other relevant agencies, requesting legal recognition of its share transaction, continuity of its operating license, and reconsideration of several government decisions that it argues contradict existing laws.
The share transfer at the heart of the dispute
The dispute stems from a share transaction completed on December 1, 2023 (15 Mangsir 2080 BS). On that date, Axiata Investments (UK) Limited sold its shares in Reynolds Holdings Limited, the parent company owning Ncell, to Spectrlite UK Limited.
Following the transaction, disagreements emerged among the Government of Nepal, the Department of Industry, the Nepal Telecommunications Authority, and other regulatory agencies regarding the legal interpretation and approval process governing the ownership transfer.
On February 18, 2024 (6 Falgun 2080 BS), Nepal’s Cabinet decided not to immediately recognize the share transaction, prohibited any alteration to Ncell’s shareholding structure, and attached additional conditions to the renewal of the company’s telecom license.
Later, although the Cabinet approved license renewal on August 29, 2024 (13 Bhadra 2081 BS) and the Nepal Telecommunications Authority formally renewed the operating license on September 1, 2024 (16 Bhadra 2081 BS), regulators maintained conditions preventing any change in the company’s ownership structure.
This contradiction now lies at the center of the legal dispute.
According to Ncell, once regulators accepted Spectrlite’s technical, financial, and managerial competence as sufficient to renew the operating license, refusing to recognize the ownership transfer no longer has a valid legal basis.
The company further argues that Spectrlite has already managed Ncell for nearly two years through internationally experienced executives, stabilized operations, improved management efficiency, and halted declining revenues—demonstrating the very capabilities regulators sought to verify.
Regulatory compliance claims
Ncell maintains that it has complied with all statutory requirements. The company says it filed the required documentation with the Department of Industry under Section 19 of the Foreign Investment and Technology Transfer Act (FITTA), 2019, while submitting complete documents to the Nepal Telecommunications Authority on March 13, 2024 (30 Falgun 2080 BS) and again on May 6, 2024 (24 Baisakh 2081 BS).
According to the company, regulators received comprehensive evidence regarding the buyer’s financial strength, technical competence, managerial expertise, and operational capability.
Ncell also points to the wording of the Cabinet’s own decision issued on February 18, 2024, which stated that license renewal would proceed once the purchaser’s technical, financial, and managerial qualifications were verified.
Since those qualifications were subsequently accepted during the renewal process, the company argues that maintaining restrictions on ownership transfer is both inconsistent and legally unjustifiable.
Rule 7A: The new regulatory flashpoint
The dispute intensified further after the government amended Nepal’s Telecommunications Regulations.
On October 28, 2024 (12 Kartik 2081 BS), the government published the Tenth Amendment to the Telecommunications Regulations, introducing a new Rule 7A.
The amendment ties license renewal to the capital structure existing at the time the original telecom license was granted.
Ncell argues that this provision fundamentally changes the legal framework after the fact.
According to the company, neither Section 25 nor Section 33 of the Telecommunications Act, 1997 prohibits foreign-invested telecom operators from changing shareholders during the validity period of a telecom license.
The company therefore contends that Rule 7A effectively introduces a new legal restriction through subordinate legislation, altering the intent of the parent Act itself.
Ncell claims the amendment violates established principles of delegated legislation and constitutes retroactive regulation. Consequently, it has formally requested the government to repeal Rule 7A.
Ownership restrictions and constitutional questions
Ncell has also challenged the government’s decision to prohibit any alteration of its shareholding structure during the license renewal period.
The company argues that the restriction conflicts with Nepal’s Constitution, the Companies Act, the Telecommunications Act, and foreign investment legislation.
Under Sections 7 and 42 of the Companies Act, 2006, company shares are recognized as transferable movable property.
According to Ncell, preventing shareholders from transferring legally owned shares through a Cabinet decision amounts to government interference with private property rights.
The company further argues that the restriction infringes constitutional guarantees, including:
* the right to conduct business under Article 17;
* the right to equality under Article 18; and
* property rights protected under Article 25.
Ncell also contends that Nepal’s Foreign Investment Policy and FITTA guarantee national treatment for foreign investors and prohibit discriminatory treatment or indirect nationalization.
For these reasons, the company has requested the government to review the Cabinet decision of February 18, 2024, recognize the share purchase agreement, remove ownership-related conditions attached to the license renewal, and repeal Rule 7A.
Tax obligations: another major dimension
Beyond ownership issues, taxation has become another significant element of the dispute.
The latest ownership transaction triggered debate over capital gains tax, income tax obligations arising from changes in ownership, and applicable tax procedures.
Ncell maintains that it has fulfilled all major tax obligations required by law, while any remaining issues are already under review by regulators and the courts.
Following the ownership transfer on December 1, 2023, Ncell says it prepared separate financial statements covering periods before and after the ownership change, in accordance with Section 57 of the Income Tax Act, 2002, and submitted them to the Large Taxpayers Office on February 26, 2024 (14 Falgun 2080 BS).
The company states that it subsequently paid Rs 1.696 billion in taxes.
Regarding capital gains tax, Ncell argues that no taxable capital gain arose from the latest transaction because the shares were sold at a substantially lower valuation than the previous acquisition.
According to the company, the earlier sale of the same foreign ownership stake occurred at approximately Rs. 144 billion, while the latest transaction took place at a significantly lower enterprise valuation.Consequently, Ncell argues that no capital gain existed upon which capital gains tax could legally be imposed.
Resolving Nepal’s largest tax dispute
The latest controversy follows Nepal’s largest-ever capital gains tax dispute arising from the earlier TeliaSonera-Axiata transaction.
Following years of litigation and a Supreme Court ruling, Ncell says it ultimately paid more than Rs 47 billion in capital gains taxes to the Government of Nepal through multiple installments. The company notes that even international arbitration ultimately upheld Nepal’s position regarding the capital gains tax dispute, thereby fully resolving that chapter.
According to Ncell, the only remaining tax issue currently before the courts concerns assessments under Section 57 of the Income Tax Act.
The company further says that correspondence from the Large Taxpayers Office confirms it has no outstanding tax liabilities beyond those currently under judicial review.
Financial consequences of regulatory uncertainty
Ncell argues that delayed government recognition of the share transaction has created significant commercial consequences.
With payments to the seller structured through installment arrangements tied to future business performance. Because regulators have not formally recognized the ownership transfer, the company says dividend distributions and contractual payments to the seller have remained frozen for nearly three years.
Investor protection under domestic and international law
Ncell has framed the dispute not merely as a corporate disagreement but as a question of investor protection under both Nepali and international law.
The company cites Nepal’s Foreign Investment Policy 2015, the Foreign Investment and Technology Transfer Act 2019, the Nepal–United Kingdom Bilateral Investment Promotion and Protection Agreement (BIPPA), and the Nepal Treaty Act 1990.
These legal instruments guarantee national treatment, prohibit arbitrary discrimination against foreign investors, and protect investments from expropriation except for legitimate public purposes under due process.
According to Ncell, treaties ratified by Nepal become enforceable domestic law under Section 9 of the Nepal Treaty Act and Nepal’s obligations under the Vienna Convention.
Therefore, the company argues that preventing legitimate ownership transfers effectively interferes with investors’ property rights and undermines legal protections guaranteed under both domestic legislation and international agreements.
Ncell warns that maintaining uncertainty surrounding its ownership structure risks sending an unfavorable message to international investors regarding Nepal’s regulatory predictability and long-term policy stability.
A proposal for majority Nepali ownership
Amid the legal dispute, Ncell has also proposed a long-term ownership solution.
The company says it is prepared to increase Nepali ownership beyond 50 percent, ultimately transforming itself into a majority Nepali-owned telecommunications operator.
As a public limited company under the Companies Act, Ncell says it is open to issuing an Initial Public Offering (IPO), enabling ordinary Nepali citizens and institutional investors to acquire ownership stakes.
Details regarding the size, pricing, premium, and allocation structure, the company says, could be finalized through consultation with regulators.
Nepal’s digital future
Perhaps the most consequential issue raised by Ncell concerns the future of Nepal’s telecommunications sector after 2029, when the company’s current license period reaches its final stage.
According to Ncell, the central issue is no longer merely ownership or license conditions—but the continuity of one of Nepal’s most important digital infrastructure providers.
Under Section 33 of the Telecommunications Act, telecommunications infrastructure owned by operators with foreign ownership exceeding 50 percent may transfer to the Government of Nepal upon expiry of the operating license.
However, Ncell argues that the law refers only to telecommunications infrastructure-not corporate ownership or shareholder rights.
Therefore, the company contends that imposing ownership restrictions during the license renewal process extends beyond what Parliament intended when enacting the Telecommunications Act.
Risks of service disruption
Ncell has warned the government that failure to ensure license continuity before 2029 could have immediate nationwide consequences.
With more than 14 million subscribers, the company argues that no other telecom operator currently possesses sufficient capacity to absorb Ncell’s entire customer base, network infrastructure, and traffic within a short period.
According to the company, any prolonged disruption would affect not only voice and data services but also banking systems, digital wallets, online payment platforms, government e-services, hospitals, schools, businesses, logistics, emergency communications, and virtually every internet-based digital platform operating across Nepal.
The company says the impact would be especially severe in remote regions where mobile networks often represent the only reliable means of communication.
Drawing comparisons with the economic disruption caused by previous social media restrictions, Ncell argues that interruption of nationwide mobile services would carry far greater economic and social consequences because telecommunications networks now constitute the backbone of Nepal’s digital economy.
Lessons from past telecom failures
Ncell also questions how the government would manage telecom infrastructure should ownership of physical assets ultimately transfer to the state.
The company points to the experiences of Smart Telecom and United Telecom, arguing that regulators struggled for years to effectively manage those operators following their financial and operational difficulties.
According to Ncell, repeating such a scenario on a much larger scale could leave millions of subscribers without service, jeopardize thousands of jobs, reduce government revenue, and undermine Nepal’s broader digital ecosystem.
Economic contribution beyond telecommunications
Ncell argues that its economic footprint extends far beyond the telecom industry itself. The company says it has contributed nearly Rs. 400 billion in taxes, royalties, fees, and other government revenues since entering Nepal.
On average, it says, approximately 50 percent of its annual revenue has been paid to the state through various taxes, license fees, royalties, and regulatory charges.
Beyond fiscal contributions, Ncell says it has invested more than NPR 2 billion in corporate social responsibility initiatives spanning healthcare, education, environmental conservation, arts and culture, women’s empowerment, disaster response, football, cricket, and early warning systems for natural disasters.
The company further estimates that its operations directly and indirectly support the livelihoods of more than 100,000 people.
An industry under pressure
Ncell also highlights broader structural challenges facing Nepal’s telecommunications industry.
According to the company, telecommunications once contributed nearly 4 percent of Nepal’s Gross Domestic Product. Today, that contribution has reportedly declined to around 1.2 percent. Industry revenues, which previously approached Rs. 100 billion annually, have fallen to roughly Rs. 68-70 billion, the company says.
Among the principal reasons identified are:
* rapid growth of over-the-top (OTT) services;
* widespread smartphone adoption;
* high taxation and regulatory fees;
* expensive spectrum charges;
* inability to adjust service tariffs in line with market conditions;
* regulatory delays; and
* the enormous capital investment required for next-generation technologies.
According to Ncell, unless these structural challenges are addressed, Nepal’s mobile operators could face increasing difficulty covering operating costs within the next five years.
Ncell’s proposed roadmap
To resolve the dispute, Ncell has presented several proposals to the government:
* repeal Rule 7A introduced through the Tenth Amendment to the Telecommunications Regulations;
* review the Cabinet decision of February 18, 2024;
* recognize the share purchase agreement between Axiata and Spectrlite;
* remove restrictions on the company’s ownership structure;
* facilitate the transition to majority Nepali ownership;
* permit an IPO enabling Nepali citizens and institutional investors to become shareholders; and
* ensure long-term license continuity.
If certainty is restored, the company says it intends to invest heavily in 5G, 6G, high-speed fiber infrastructure, and next-generation digital technologies, positioning itself as a major infrastructure partner in implementing the Government of Nepal’s Digital Nepal Framework.
More than one company’s future
Ncell acknowledges that the dispute will ultimately be resolved through legal, regulatory, and governmental processes.
Yet whatever decision emerges will shape far more than the future of one telecommunications operator.
It will influence how Nepal is perceived by international investors, how consistently its laws are applied, how regulatory certainty is maintained, how digital infrastructure is protected, and how confidence is built between the state and private investment.
The Ncell case is therefore no longer simply an administrative matter involving telecom licensing. It has become a defining test of Nepal’s policy credibility at a time when the country’s economic future is increasingly tied to digital connectivity, technological investment, and regulatory stability.
If Nepal succeeds in balancing the rule of law, investor rights, consumer protection, state interests, and the uninterrupted operation of critical digital infrastructure, the Ncell case could ultimately become a model for resolving complex investment disputes while reinforcing confidence in Nepal’s digital future.
