Kathmandu, April 28

In a bid to increase competition in the telecommunication sector of the country, the government is set to introduce a policy allowing domestic telecom companies to merge.

The telecommunication sector regulator — Nepal Telecommunications Authority (NTA) — has prepared a draft of the Merger and Acquisition Guideline, which includes a provision allowing a telecom firm to acquire another. By encouraging telecom firms to merge, NTA aims to reduce number of telecom firms operating in Nepal to three.

Currently, there are six telecom service providers in Nepal — Nepal Telecom (NT), Ncell, UTL, Smart Telecom, Nepal Satellite Telecom and STM Telecom.

“Our analysis has shown that a large number of telecom companies is a setback to fair competition and does not ensure stability of telecom operators,” said Min Prasad Aryal, spokesperson for NTA, adding that international practices also show that there are only about three to four telecom service providers in one country.

As per Aryal, the draft of the Merger and Acquisition Guideline will soon be passed by the NTA board before it is sent to the Ministry of Information and Communications (MoIC) for its approval from the Cabinet.

However, the draft of the Merger and Acquisition Guideline has set certain preconditions for telecom firms to merge. For instance, telecom companies that have more than 40 per cent current market share in the telecommunication industry will not be allowed to merge with any other company. Also, only telecom firms with current market share of less than five per cent will be allowed to go for merger. Another provision is that telecom companies will not be allowed to merge with each other if their combined market share crosses 40 per cent after the merger.

Such provision in the draft of Merger and Acquisition Guideline means two major telecom operators — NT and Ncell — cannot merge with each other or with any of other four operators as market share of both NT and Ncell is above 40 per cent in domestic telecommunication industry. However, guideline allows UTL, Smart Telecom, Nepal Satellite Telecom and STM Telecom to merge with one another.

“Telecom firms with more than 40 per cent market share are referred to as ‘dominant players’ and allowing them to merge might result in a monopoly of one particular telecom company,” added Aryal.

As per NTA, NT and Ncell dominate the telecommunications market in Nepal, where NT has 48 per cent and Ncell has 45 per cent of the total market share of voice telecommunications. The other four telecom companies jointly have seven per cent market share.

NTA is also of view that UTL, Smart Telecom, Nepal Satellite Telecom and STM Telecom are merely occupying telecom bandwidth and not focusing on enhancing their network and services.