Kathmandu – Ncell’s Managing Director and CEO, Jabbor Kayumov, appeared on a public stage in an unconventional manner on Wednesday. Dressed in an informal setup at a company event, Kayumov addressed critical issues in the telecom sector, cautioning that billions in investments could crumble if urgent matters are not addressed.
Typically, press conferences organized by companies focus on their own issues. However, Kayumov avoided discussing Ncell’s specific concerns and instead presented data showing how Nepal is losing benefits from its telecom sector. He stated unequivocally: “Nepal’s telecom sector is failing. Its failure means the state loses its assets. Do we want to become popular and lose assets or unpopular and save them?”
Kayumov highlighted the continuous decline in business and how policy hurdles have restricted telecom companies’ investments to just NPR 6 billion. “A few years ago, Ncell and Nepal Telecom were investing NPR 18 billion annually. Now, this has dropped to NPR 6 billion, impacting the country’s revenue,” he said.
He cited India’s example of safeguarding its telecom sector by making decisions that initially seemed unpopular, such as adopting a subscription-based long-term model and regular tariff adjustments. He suggested implementing a similar model in Nepal, requiring a minimum monthly payment. “This decision might seem unpopular now, but it will help our mobile services sustain and grow,” Kayumov explained. “If the telecom sector collapses, both the state and consumers will suffer.”
Minimum Charges in Other Utilities
Other utilities like electricity, landline phones, waste management, and drinking water charge minimum monthly fees regardless of consumption. For instance, electricity charges NPR 80, water NPR 100, waste management NPR 250, and fixed phones NPR 200. Most internet service providers (ISPs) also offer packages ranging from monthly to two years, suspending service immediately after expiry. Though this model may appear unpopular, Kayumov believes it can save the telecom sector.
The Decline in the Telecom Sector
Kayumov revealed that in seven years, the telecom sector’s contribution to Nepal’s GDP has shrunk from 3.9% to 1.8%. Revenue from mobile and internet services has declined by 5% over six years, while neighboring countries have seen significant growth in telecom revenue: 112% in India, 46% in Bangladesh, and 38% in Sri Lanka.
In 2016/17, Nepal’s telecom market was worth NPR 102 billion. By 2022/23, this had fallen to NPR 96.8 billion. Similarly, the mobile services market for Nepal Telecom and Ncell has dropped from NPR 97.3 billion in 2016/17 to NPR 73.1 billion in 2022/23.
From 2008 to 2016, Nepal experienced a “hyper growth” phase in mobile services due to three factors: a low initial user base, increasing international outgoing calls due to labor migration, and widespread mobile adoption during load-shedding periods. However, since 2020, telecom operators’ revenues have been steadily declining, a trend the industry refers to as a “revenue crash.”
Challenges in Revenue and Regulation
The pandemic forced operators to reduce data prices, and aggressive market interventions by ISPs further exacerbated the situation. Regulatory provisions, including the Telecom Service Charge (TSC), have added financial burdens on operators. For instance, the renewal fee for GSM mobile services in Nepal is NPR 20 billion, while ISPs only pay NPR 300,000, even though 77% of mobile users spend over 60% of their time on Wi-Fi.
Despite 90% 4G coverage nationwide, only 2 out of 10 users consistently use mobile data, with average monthly consumption of just 4 GB per user—South Asia’s lowest. In contrast, 8 out of 10 users in Bangladesh and 9 out of 10 in India use mobile data regularly.
Financial Constraints for 5G
Kayumov indicated that current business conditions make launching 5G services by Ncell or Nepal Telecom unlikely. “Investments are made based on returns, and neither company can justify 5G investments under the current circumstances,” he said.
Third Operator Unlikely
He also dismissed the viability of a third telecom operator in Nepal, citing the poor return on investment in the sector. “Given the declining telecom business, a third operator is unlikely to succeed,” Kayumov stated.
Welcoming Starlink
Kayumov welcomed the idea of Starlink entering Nepal but expressed doubts about its feasibility due to Nepal’s terrain and other challenges. He mentioned that Starlink’s minimum service charge is USD 20.
This comprehensive presentation by Kayumov underlines the urgent need for reforms to sustain Nepal’s telecom sector and ensure its continued contribution to the economy.
