28 August 2024, Kathmandu
Nepal’s telecom sector, represented by Ncell and Nepal Telecom, is grappling with continuous revenue decline due to the rise of OTT services, a drop in International Long Distance (ILD) traffic, and limited returns from data services despite growing demand.
Nepal’s Telecom Sector Faces Declining Revenue
Both companies have seen their revenue drop by 25% over the past five years, a stark contrast to neighboring countries like Bangladesh and Sri Lanka, which have experienced a 40% growth.
Customer demand for data has surged, but data pricing has continued to drop due to intense competition. The government lacks provisions to adjust service charges in line with investment and inflation, further straining the sector. Nepal’s per-customer monthly data usage is only 4.5 GB, significantly lower than India’s 20 GB. Additionally, digital literacy remains poor, and there are restrictions on the operation of DVAS.
The telecom industry, which once contributed 5% to Nepal’s GDP, now accounts for just 2%. The market has shrunk from NPR 100 billion to below NPR 75 billion. To maintain their networks, the industry invests 2-3 times its profitability, with future technologies like 5G requiring an estimated NPR 60 billion—12 times the current profit—to deploy.
Government plans to export IT services worth NPR 3 trillion in the next decade and produce 1.5 million IT workers are under threat if the telecom sector, a crucial ICT ecosystem player, doesn’t receive support. The small market size combined with heavy spectrum charges through auctions makes essential telecom services expensive.
Despite contributing over 50% of their income as taxes and fees, the telecom companies face sustainability issues, particularly with the NPR 20 billion GSM license renewal fee required every five years. The lack of amendment to the 27-year-old Telecommunications Act 1997, despite significant technological changes, exacerbates the challenges.
The sector’s revenue is expected to drop by NPR 16 billion in the next five years, with the government potentially losing NPR 3.7 billion due to a decrease in telecom-related taxes and fees. The shrinking revenue will lead to reduced capital expenditure, resulting in poor network performance, ultimately impacting consumer experience and the industry’s sustainability.
Nepal’s Telecom Sector Faces Declining Revenue