The Nepal Telecommunications Authority has prepared a draft regulation that allows telecommunications service providers to merge.

“Both voice telephone operators and internet service operators can go for merger once the proposed regulation comes into force,” said Purushottam Khanal, chairman of the country's telecom regulator. The authority has proposed to facilitate mergers to streamline the telecommunications service industry.

Currently, there is no guideline governing the merger of telecommunications operators.

The authority has sent the draft regulation to the Ministry of Communication and Information Technology for its review. The ministry will forward it to the cabinet for final approval.

Sebantak Pokharel, spokesperson for the Ministry of Communication and Information Technology, said they received the draft two weeks ago.

“We will hold discussions on the draft with the concerned stakeholders and reveal the terms in it after it is finalised,” he said. “The ministry will send the draft to the cabinet once it is decided.”

Khanal said a merger decision could be made by the annual general meeting of the telecommunications companies. He said the draft also contained a provision on forceful merger.

“If the regulator orders problematic service providers to merge, they have to proceed accordingly. Two or more telecommunications operators can merge. The regulation will benefit small companies in rural areas too,” he said.

"Consolidation will strengthen telecommunications service providers in terms of investment, and customers will be spared the hassle of changing service providers if their company closes down," Khanal said.

"This will increase the capacity of firms to install updated technology, promote service expansion and lessen overheads besides providing other benefits. It will also boost the confidence of customers."

Khanal added that they had recommended to the government to facilitate merger of telecommunications operators. "We hope the government provides incentives to merge like waiving capital gains tax. This will encourage service providers to go for merger."

According to the authority, there are 204 telecommunications service providers operating in the country.

There are three voice telephone service providers—Nepal Telecom, Ncell and Smart Telecom—with 41.93 million voice telephone subscribers as of mid-July, according to the management information report of the authority. Among them, Nepal Telecom accounts for 22.51 million subscribers, Ncell 17 million and Smart Telecom 2.37 million.

Internet subscribers in the country number 38.42 million, of which 20.69 million are mobile broadband users of Nepal Telecom, 9.18 million Ncell internet subscribers, 146,382 Smart Telecom internet subscribers and 8.39 million subscribers of other internet service providers.

"Huge amounts are spent on technology and equipment in the telecom sector, but many of the firms collapse, resulting in wastage of money and loss of jobs," Khanal said.

"If such telecom service providers are sustained through merger and brought into a competitive environment, it will benefit the company and the customer too," he said.

"There are 138 internet service providers in Nepal resulting in a crowded playing field and making life hard for small-scale service providers."

According to the management information report, the authority has recommended payment of Rs733 million in foreign currency for bandwidth and service charges of different telecom operators for the period mid-June to mid-July.

The authority has also recommended payment of Rs289.19 million in foreign currency for the telecommunications equipment of different telecom operators for the same period.

According to Khanal, the authority had recommended merging telecommunications operators to the government in 2017. “We have made a few updates to the previous draft,” he said.

Service providers wishing to merge have to submit an application to the authority with an audit report and declaration. If the paperwork fulfils the requirements, the authority will provide an agreement in principle for the merger and facilitate the process.

The authority has declared that aspiring telecommunications service providers need to have a paid-up capital of Rs50 million.

"Hundreds of old telecommunications licensees do not have the required amount of paid-up capital," Khanal said. “They will have to come up with the required paid-up capital themselves or by merging with other companies.”